Use the information below to answer the following questions.
Fact 13.1.1
The following statements give some information about seven markets.
1. Coca-Cola cuts its price below that of Pepsi-Cola in an attempt to increase its market share.
2. A single firm, protected by a barrier to entry, produces a personal service that has no close substitutes.
3. A barrier to entry exists, but the good has some close substitutes.
4. A firm offers discounts to students and seniors.
5. A firm can sell any quantity it chooses at the going price.
6. The government issues Nike an exclusive licence to produce golf balls.
7. A firm experiences economies of scale even when it produces the quantity that meets the entire market demand.
-Refer to Fact 13.1.1. The firm described in ________ can price discriminate if it can ________.
A)statements 2, 3, 6, and 7; eliminate the barriers to entry
B)statements 2, 3, 6, and 7; distinguish between different classes of consumers
C)statements 2 and 3; eliminate the current barriers to entry
D)statement 1; increase advertising
E)statement 1; decrease its costs

Question

Quizplus · Accepted Answer

The firm described in statements 2, 3, 6, and 7 can price discriminate if it can distinguish between different classes of consumers. Price discrimination involves charging different prices for the same product to different groups of consumers based on their willingness to pay. This can only be achieved if the firm can identify and separate consumers into different groups based on their willingness to pay for the product or service. The barriers to entry, economies of scale, and exclusive license do not necessarily allow for price discrimination, but they may affect the competitiveness and profitability of the firm. Statement 1 is about price competition and does not relate to price discrimination.

Use the Information Below to Answer the Following Questions