Multiple choice

Price discrimination is profitable when

  1. the elasticity of a product is the same in different markets

  2. the elasticity of a product is different in different markets

  3. the elasticity of a product is zero in different markets

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Price discrimination works when different market segments have different price elasticities. The firm charges higher prices in less elastic (inelastic) markets and lower prices in more elastic markets to maximize total revenue. If elasticities are same, discrimination is pointless.

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