In which of the following situations is price discrimination not possible? Demand curve for the firm's...
In which of the following situations is price discrimination not possible?
Demand curve for the firm's output is perfectly elastic
Marginal Cost of production = Average Total Cost = a constant
Marginal Cost of production is less than the Average total cost of prouction.
Homework Answers
Price discrimination refers to the practice of charging different prices from different customers for the same product.
The price discrimination can only be possible when firm has market power or the power to determine the price.
As we know that, perfectly competitive firm does not have power to determine price. It has to accept the price as determined by the market. A perfectly competitive firm is a price taker.
Since, the price is given in case of perfectly competitive firm, it faces a perfectly elastic demand curve.
So,
It can be stated that when demand curve for the firm's output is perfectly elastic then, in that case, price discrimination is not possible.
Hence, the correct answer is the option (A).
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