A Firm Sells an Identical Product to Two Groups of Consumers

question 95

Multiple Choice

A firm sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximize profits. Which of the following best describes the price and output strategy that will maximize profits?

• A) P_A = P_B = MC.
• B) MR_A = MR_B.
• C) MR_A = MR_B = MC.
• D) (MR_A - MR_B) = (1 - MC).

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Definitions:

Other Channel Members

Refers to the different participants in a distribution channel, including wholesalers, retailers, and distributors, excluding the manufacturer and the end customer.

Horizontal Conflict

A dispute or disagreement that occurs between businesses operating at the same level in the distribution channel, such as two competing retailers.

Dual Distribution

A marketing strategy where a company uses two or more channels to reach its target market, often simultaneously selling through direct and indirect channels.

Distribution Coverage

Distribution coverage refers to the measure of how much of the target market has access to a company's products or services through its distribution channels.