Three factors that must be met for price discrimination to occur: the firm must have market power, the firm must be able to recognize differences in demand, and the firm must have the ability to prevent arbitration, or resale of the product.
What are the conditions under which price discrimination is possible?
Price discrimination is possible under the following conditions: The seller must have some control over the supply of his product. Such monopoly power is necessary to discriminate the price. The seller should be able to divide the market into at least two sub-markets (or more).
What must occur for a firm to ensure profitable price discrimination?
Question: What must occur for a firm to ensure profitable price discrimination? The firm must encourage other firms and competitors to engage in arbitration O Products must be sold in countries where a small change in prices produces a large change in demand.
What is the most profitable level of output for a monopoly?
A monopolistic market has no competition, meaning the monopolist controls the price and quantity demanded. The level of output that maximizes a monopoly’s profit is when the marginal cost equals the marginal revenue.
What is indirect price discrimination?
Indirect price discrimination, or second-degree price discrimination, is when you allow customers to choose their own distinct prices. Bulk discounts, where the company charges a lower price per unit when the customer buys more, are an example.
What are the limits of price discrimination quizlet?
What potentially limits price discrimination? A firm’s ability to practice price discrimination will be limited if consumers who can buy a good at a low price resell it to consumers who would otherwise have to pay high prices.
What can a firm with market power do?
What can a firm with market power do? A market power firm can raise prices without losing any customers to competitors. Government usually approves of natural monopolies, so that we don’t waste resources and because the government can control the price and services provided.
