Multiple Select QuestionSelect all that applyWhich of the following are conditions necessary for price discrimination?Multiple select question.AdvertisingNo resaleHomogeneous marketMonopoly powerMarket segregation
Question
Multiple Select QuestionSelect all that applyWhich of the following are conditions necessary for price discrimination?Multiple select question.AdvertisingNo resaleHomogeneous marketMonopoly powerMarket segregation
Solution
The conditions necessary for price discrimination are:
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Monopoly power: The firm must have some degree of market power, which means it has control over the price. In a perfectly competitive market, price discrimination cannot occur.
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Market segregation: The firm must be able to segment the market. That is, it must be able to divide its market into separate groups of consumers.
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No resale: The firm must be able to prevent or limit resale. If consumers can buy at a low price and sell at a higher price, the firm's ability to price discriminate will be undermined.
So, the correct answers are "No resale", "Monopoly power", and "Market segregation". "Advertising" and "Homogeneous market" are not necessary conditions for price discrimination.
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