An Important Lesson of Price Discrimination Is That

question 231

Multiple Choice

An important lesson of price discrimination is that:

• A) price discrimination will always lead to lower profits in one of the two markets.
• B) firms can increase profits by differentiating their product attributes.
• C) all firms can perfectly price discriminate.
• D) it only increases profits when the demand curves in two different markets are not the same.

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Definitions:

Fixed Manufacturing Overhead

Regular, unchanging costs associated with operating a manufacturing facility, excluding variable costs, such as rent, utilities, and salaries for management.

Margin of Safety

The difference between actual or expected sales and the break-even point, representing the cushion against potential losses.

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.