Question

Firms are able to price discriminate A. when there is full information about quality available to all customers. B. when all customers are uninformed about quality differences. C. when no customers are uninformed about quality differences. D. when some customers are uninformed about quality differences.

Answer 1

Answer: Firms are able to discriminate price when all customers are uninformed about quality differences.

Explanation:

Price discrimination is a price strategy in microeconomics where similar products are sold services at different prices by the same producer in different markets. Price differentiation relies on variation in customers willingness to pay and in their elasticity of demand. Price discrimination usually relies on monopoly power, product uniqueness, market share and sole pricing power.

Examples of the forms of price discrimination are age discounts, coupons, retail incentives, occupational discounts, haggling gender based pricing and financial aid.

Answer 2

Answer: D. when some customers are uninformed about quality differences.

Explanation: Price discrimination is a selling strategy with the notion that different customers can be charged varying prices for the same product or service. It is usually based on how the customer values the product or service in question or on certain groupings based on demographics. Price discrimination thus most valuable when the profit earned as a result of market separation is greater than the profit earned from combined markets combined. Basing on this, firms are able to price discriminate when some customers are uninformed about quality differences.