A price-discriminating company can attract more customers by _____ price, as long as _____.
A)reducing; the price is above marginal benefit and below marginal cost
B)reducing; the price is above its marginal cost
C)raising; the price is above marginal benefit and below marginal cost
D)raising; new customers are convinced to pay the price

Question

Quizplus · Accepted Answer

A price-discriminating company can attract more customers by reducing the price as long as the price is above its marginal cost. This is because the company can still make a profit from selling at a lower price, and more customers are willing to purchase when prices are lower. However, if the price falls below marginal cost, the company will start to make a loss on each unit sold, which is not sustainable in the long run. Therefore, the price should remain above the marginal cost.

A Price-Discriminating Company Can Attract More Customers by _____ Price