Which of the following is the main principle of price discrimination?
I. It is more profitable to set different prices in markets with different demand curves than charge the same price in all markets.
II. To maximize profits, firms should charge lower prices in markets with more elastic demands.
III. Arbitrage increases the profit opportunities of price discrimination.
A) I and III only
B) II only
C) I and II only
D) I, II, and III

Question

Quizplus · Accepted Answer

The main principle of price discrimination is that it is more profitable to set different prices in markets with different demand curves than to charge the same price in all markets (Principle I). Additionally, to maximize profits, firms should charge lower prices in markets with more elastic demands (Principle II). However, Principle III is not always true, as arbitrage can sometimes reduce the profit opportunities of price discrimination. Therefore, the best choice is C, which includes the two most important principles of price discrimination: I and II.

Which of the Following Is the Main Principle of Price