Final answer:
Price discrimination occurs when a firm sells the same good at different prices to consumers, depending on their willingness to pay. This practice allows a firm to maximize profits by capturing consumer surplus and can be regulated to ensure fair pricing and efficient resource allocation.
Step-by-step explanation:
Price discrimination exists when a firm sells the same good at different prices to various buyers. The correct answer to the given question is A) Consumers. Firms engage in price discrimination when they are able to identify and segment different groups of consumers according to their willingness to pay and have the market power to charge them different prices for the same good. For example, movie theaters might charge a lower price for seniors and students than for other adults.
In economic theory, perfect price discrimination is a scenario where the monopolist produces the same quantity as would a perfectly competitive industry but charges each consumer exactly the highest price they are willing to pay, leading to no consumer surplus and maximum profits for the monopolist. Regulators might intervene to set prices equal to marginal cost to achieve efficient resource allocation and benefit the broader social interest.