course hero which of the following is a condition required for the practice of price discrimination

by Mrs. Neoma Deckow 4 min read

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.

Full Answer

How to maximize profits in power of markets?

What is the third condition for price discrimination?

Is it harder to resale durable goods?

About this website

What are the conditions for price discrimination?

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).

Which of the following is not a condition for price discrimination?

The correct answer is d. The seller must have zero fixed costs. A seller has to incur fixed costs irrespective of the quantity produced or sold. A seller cannot have zero fixed costs and hence, it is not a condition for price discrimination.

Which of the following is the fundamental condition that would allow a firm to practice price discrimination?

A key condition for price discrimination to occur is the identification of different market segments. If this is possible different groups have different price elasticities of demand. Therefore the firm can charge different prices depending on the consumers sensitivity to price changes.

Which of the following correctly describes price discrimination?

Answer and Explanation: Price discrimination is the practice of offering the same product to different customers at different prices.

What is required for price discrimination Mcq?

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). The price elasticity of the product must be different in different markets.

Which of the following is not a type of price discrimination Mcq?

Answer and Explanation: The correct answer is D. Charging the same price to everyone for a good or service is not price discrimination.

Which of the following are conditions necessary for price discrimination quizlet?

Three conditions necessary for Price discrimination.The producer must have some price-setting ability, the market must be imperfect. ... The consumers must have different price elasticities of demand for the product.More items...

Which of the following statements is correct both perfectly competitive and monopolistic firms are price takers?

The correct answer is b) A purely competitive firm is a "price-taker" and a monopolistic firm is a "price-maker".

Under what circumstances can a firm successfully practice price discrimination to successfully practice price discrimination?

Under what circumstances can a firm successfully practice price discrimination? Some consumers must have greater willingness to pay for the product than others and a firm must know consumer willingness to pay for the product.

What are the 3 types of price discrimination?

There are three types of price discrimination: first-degree or perfect price discrimination, second-degree, and third-degree.

What are the 3 types of price discrimination with examples?

Different Types of Price DiscriminationFirst Degree Price Discrimination. Also known as perfect price discrimination, first-degree price discrimination involves charging consumers the maximum price that they are willing to pay for a good or service. ... Second Degree Price Discrimination. ... Third Degree Price Discrimination.

Which of the following is an example of a price discrimination quizlet?

Price discrimination is the business practice of selling the same good at different prices to different customers. Charging adults and children different prices for the same movie is an example of price discrimination.

Which of the following conditions is not required for price discrimination quizlet?

Which of the following conditions is not required for price discrimination? Buyers with different elasticities must be physically separate from each other. Price discrimination refers to: the selling of a given product at different prices to different customers that do not reflect cost differences.

Which of the following is a type of price discrimination?

There are three types of price discrimination: first-degree or perfect price discrimination, second-degree, and third-degree.

Which of the following is not a condition for price discrimination a downward sloping demand curve for products?

The answer is d) having a constant marginal cost.

What are three different forms of price discrimination?

There are three types of price discrimination that you can encounter: first-degree, second-degree, and third-degree. These degrees sometimes go by other names: personalized pricing, product versioning or menu pricing, and group pricing, respectively.

Conditions for Price Discrimination Exam Answer - tutor2u

A sample answer to this question. "Explain the conditions under which a business is able to engage in price discrimination" Price discrimination is when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs.

Conditions when Price Discrimination is Profitable - Economics Discussion

ADVERTISEMENTS: Price discrimination is profitable under following facts: 1. Larger Output: The term discrimination suggests that consumers are exploited in order to increase the profits of the monopolists. Since price discrimination enables the monopolist to obtain a higher total revenue (and thus higher profits) than if he charges a single price for the whole of […]

Price Discrimination: Definitions, Types, Conditions and Degrees

ADVERTISEMENTS: Price Discrimination: Definitions, Types, Conditions and Degrees! Price discrimination refers to the charging of different prices by the monopolist for the same product. The difference in the product may be on the basis of brand, wrapper etc. This policy of the monopolist is called price discrimination. Definitions: “Price discrimination exists when the same product […]

What is the third condition for price discrimination?

And then third thing is, a third, the third condition for price discrimination, you have to prevent resale. If you can sell a product to a senior citizen, let's say General Motors, offered cars to senior citizens, at 20% less than for other consumers.

How to maximize profits in power of markets?

In order to maximize profits, firms must ensure that any given output level is produced at least cost and then select the price-output combination that results in total revenue exceeding total cost by the greatest amount possible. With this in mind, this second module of the Power of Markets course addresses how firms can most effectively convert inputs into final output and then covers determining the best price-output combination for a firm and how this varies depending on whether the firm is operating in a perfectly competitive or imperfectly competitive market setting.

Is it harder to resale durable goods?

Durable goods. Goods that last and can be stored are very hard to prevent resale on. Whereas goods that has to be consumed on the spot, it's much harder for resale to occur and as a result suppliers find it easier to price discriminate. Now, let's look at price and output determination, with price discrimination.

Why do we adopt the policy of price opinion?

Sometimes the feeling of the consumer becomes a reason for adopting the policy of price opinion that a product of higher price is better than a product pf lower price, he may adopt this policy.

Why is nature important in product?

Nature of Product. Nature of product also helps in adopting the policy or price discrimination. If a product used for different purposes, the manufacturer may decide to charge different prices for such a product on the basis of its use. 8.

What is price discrimination?

Price discrimination refers strictly to the practice by a seller of simultaneously charging different prices to different buyers for the same goods. conditions for price discrimination.

When the consumers of a product belong to different groups of society and different income groups, the manufacturer can adopt the policy?

When the consumers of a product belong to different groups of society and different income groups, the manufacturer can adopt the policy of price discrimination.

When a product is sold in different segments of a market and these segments are at distance from each other, the?

If a product is sold in different segments of a market and these segments are at distance from each other, the policy of price discrimination can be adopted.

When is price discrimination most commonly adopted?

The policy of price discrimination is very commonly adopted when the manufacturer enjoys the situation of monopoly in the market.

Which situation can be adopted by the policy of price discrimination?

A very common situation in which the policy of price discrimination can be adopted is the situation of monopoly created by making an agreement among all the competitors to charge a certain price for a product.

What is price discrimination?

Price discrimination is when a seller sells a specific commodity or service to different buyers at different prices for reasons not concerning differences in costs. In this article, we will look at the conditions, objectives, and equilibrium under price discrimination.

When is price discrimination possible?

Answer: Price discrimination is possible only when the buyers from different sub-markets are willing to purchase the same product at different prices. If the elasticity of demand is the same, then the effect of the price change on the buyer will be identical too. Therefore, the correct answer is option b.

What happens when a monopolist transfers a product from market A to market B?

This is because, in market B, the high elasticity of demand implies larger marginal revenue. It is important to note here that when units are transferred from A to B, price in A will rise and fall in B.

Why is monopoly power necessary?

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). The price-elasticity of the product must be different in different markets. Therefore, the monopolist can set a high price for those buyers whose price-elasticity of demand for ...

How does a monopolist maximize his profits?

The monopolist maximizes his profits by producing the level of output at which MC intersects AMR. From III above, we can see that the intersecting point is E which corresponds to OM level of output. Once the monopolist determines the total output to be produced, he starts planning about distributing the output between the two sub-markets. He distributes it in a manner that the marginal revenues in both the sub-markets are equal. This ensures maximum profits.

What is monopoly pricing?

In a monopoly, the seller adopts this method of pricing to earn abnormal profits. It is important to remember that price discrimination cannot persist under perfect competition since the seller has no control over the market price of the product/service. It requires an element of monopoly to allow him to influence the price.

What happens when the MRs are equal?

Once the MRs are equal, the transfer becomes unprofitable. However, for price discrimination, he must also ensure that the MRs are equal to the marginal cost of the total output. This ensures that the amount sold in both the sub-markets is equal to the whole output OM which is fixed after equalizing AMR with the marginal cost.

How does a monopolist decide the equilibrium price?

We know that under simple monopoly the producer will charge the equilibrium price on the basis of total output and the marginal revenue and marginal cost will decide the equilibrium of the monopoly firm. But in order to discriminate prices the discriminating monopolist would divide the entire market into sub-markets on the basis of the elasticity of demand for the product. Only if the elasticity of demand is different, price discrimination will be profitable. After dividing the market, the monopolist has to decide the supply for each sub-market.

What is the second degree of price discrimination?

In second degree, price discrimination the monopolist charges different prices for a specific quantity or block of output. It means monopolist will sell one block of product at one price and another block at lower price. Second degree price discrimination is more common than first degree price discrimination.

What is price discrimination?

Price discrimination refers to the practice of selling the same commodity at different prices to different buyers. Under the situation of monopoly the producer usually restricts output and sells it at a higher price, thereby making maximum profit. If the monopolist charges different prices from different customers for the same commodity, ...

Why do monopolists use price discrimination?

The reason for a monopolist to apply price discrimination is to obtain an increase in the total revenue and his profits. We will start from the simplest case of a monopolist who sells his product at two different markets. It is assumed that the monopolist will sell this product in two segregated markets.

How many markets should be kept separated?

There should be two or more markets or groups which can be kept separated. If consumer of one market can resell the commodity in the market where the commodity is costlier, price discrimination will cease to exist. 3. The elasticity of demand in these two or more markets should be different.

What is the simplest discrimination of the first degree?

The simplest kind of discrimination of the first degree is one where, for some reason, consumers buy only one unit each from the firm. Knowing exactly how willing they are, the firm charges each one a price so high that the consumers almost, but not quite, refuse to pay the prices. If all of the consumers have different tastes, the firm has a different price for each one. The lowest price is determined by costs.

Why is price discrimination possible?

Price discrimination is also possible due to tariff restrictions. We sell our product at higher prices in domestic market but the same product is sold at lower prices in international market because of tariff barriers.

How to maximize profits in power of markets?

In order to maximize profits, firms must ensure that any given output level is produced at least cost and then select the price-output combination that results in total revenue exceeding total cost by the greatest amount possible. With this in mind, this second module of the Power of Markets course addresses how firms can most effectively convert inputs into final output and then covers determining the best price-output combination for a firm and how this varies depending on whether the firm is operating in a perfectly competitive or imperfectly competitive market setting.

What is the third condition for price discrimination?

And then third thing is, a third, the third condition for price discrimination, you have to prevent resale. If you can sell a product to a senior citizen, let's say General Motors, offered cars to senior citizens, at 20% less than for other consumers.

Is it harder to resale durable goods?

Durable goods. Goods that last and can be stored are very hard to prevent resale on. Whereas goods that has to be consumed on the spot, it's much harder for resale to occur and as a result suppliers find it easier to price discriminate. Now, let's look at price and output determination, with price discrimination.

image