A firm selling in two markets is practicing price discrimination
A) anytime it charges different consumers different prices.
B) when it is charging different consumers different prices and the price difference is not based upon cost differences.
C) when it refuses to sell the good to some group of consumers.
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

Price discrimination occurs when a firm charges different prices to different consumers for the same product or service, and the price difference is not based on cost differences. This practice is profitable because it allows the firm to capture a greater share of the consumer surplus. Therefore, choice B is the correct answer. Choices A and C are incorrect because they do not necessarily involve price discrimination, as different prices may be justified based on cost differences, and refusing to sell to some consumers is not the same as charging different prices. Choice D is incorrect because it includes options that are not related to price discrimination. Choice E is incorrect because the statement is false, as price discrimination is a specific pricing strategy that has clear characteristics and requirements.

A Firm Selling in Two Markets Is Practicing Price Discrimination