Question

Which of the following is necessary in order for a firm to successfully practice price​ discrimination? A. The​ firm's transactions costs must be zero. B. The demand for the​ firm's product is inelastic. C. The firm must practice product differentiation. D. The firm must be able to segment the market for the product.

Answer 1

D

Step-by-step explanation:

Price discrimination is when the same product is sold at different prices to customers in different markets

Types of Price Discrimination

1. first degree price discrimination : here sellers charge each consumer at their willingness to pay in order to eliminate consumer surplus.

2. second degree price discrimination : here firms offer different prices depending on the quantity purchased. e.g. giving discounts for bulk purchases.

3, third degree price discrimination : firms charge different prices to different groups of customers. e.g. having a certain price for senior citizens, students

Requirements to practice successful price discrimination

1. The firm must have market power. If the firm does not have market power and attempts to price discriminate they would lose customers
2. The firm must have different elasticities of demand for their product in different markets
3. The firm must be able to segment the market for their products