Which of the following conditions would prevent a firm from setting different prices in different markets?
A) possibility of arbitrage for buyers between different markets
B) law enforcement preventing smuggling from occurring
C) government intervention forcing the firm to reduce the level of output
D) government imposition of a price ceiling

Question

Quizplus · Accepted Answer

If buyers can easily arbitrage between different markets with different prices, then the firm cannot effectively set different prices. Buyers will simply buy the product in the cheaper market and resell it in the more expensive market, eliminating any price differential. Option B is also a potential answer, but it is less likely since smuggling is often difficult to prevent completely. Option C and D do not necessarily prevent a firm from setting different prices in different markets.

Which of the Following Conditions Would Prevent a Firm from Setting