Final answer:
The necessary conditions for third-degree price discrimination to enhance profits are: 1) at least one group has an elasticity of demand less than 1, 2) resale between groups is prevented, and 3) there are two different groups with different elasticities of demand.
Step-by-step explanation:
To enhance profits through third-degree price discrimination, the following conditions are necessary:
- At least one group has an elasticity of demand less than 1 in absolute value. Price discrimination relies on charging different prices to different groups based on their willingness to pay. If a group has an elasticity of demand less than 1, it means the group is less responsive to price changes, making them more willing to pay higher prices.
- We are able to prevent resale between the groups. Resale between groups would undermine the effectiveness of price discrimination. If groups can easily resell to each other, they may end up paying the same price, negating the purpose of price discrimination.
- There are two different groups with different (and identifiable) elasticities of demand. Price discrimination requires the ability to identify and target different groups with varying elasticities of demand. If there are no distinct groups with different elasticities, price discrimination cannot be implemented effectively.
Therefore, options a, b, and c are the necessary conditions for third-degree price discrimination to enhance profits.