(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge
A) a lower price to the group that has the less elastic demand.
B) a higher price to the group that has the less elastic demand.
C) the same price to both groups but include a "free" related product for the group that has an inelastic demand.
D) the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.

Question

Quizplus · Accepted Answer

A firm with pricing power will charge a higher price to the group with less elastic demand because this group is less sensitive to price changes and will continue to purchase the product even at higher prices.

(Last Word) Suppose That a Firm Has "Pricing Power" and Can