The strategy where a seller charges different prices to different buyers for the same product is known as __________?
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Answer: B. price discrimination
Explanation
Price discrimination occurs when a firm charges different buyers varying prices for the exact same product or service. This commercial practice aims to capture maximum consumer surplus by segmenting buyers based on willingness to pay. It requires market power and barriers that prevent lower price buyers from reselling to higher price customers. Common examples of price discrimination include airline ticket pricing, student discounts, and volume based business rebates. Economic theory categorizes price discrimination into first, second, and third degrees depending on customer information levels. Firms implement this strategy to increase total revenue and profitability beyond what a single uniform price could achieve.
Price incurrence is an invalid term that does not describe charging different prices to various buyers in commerce. Price targeting is a colloquial expression rather than the formal economic term known as price discrimination. Price engineering is not standard terminology for varying customer price points based on market segmentation.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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