Which statement offers the most accurate definition of price discrimination ?
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Answer: D. selling a certain product of given quality and cost per unit at different prices to different buyers
Explanation
Price discrimination is defined as selling identical products at varying prices to different buyers without cost differences. Sellers exploit differing consumer elasticities of demand to maximize total corporate revenue and profit margins. The price variation is based strictly on willingness to pay rather than the underlying cost of production. Microeconomic theory categorizes price discrimination into first degree second degree and third degree types. Firms must possess market power and prevent consumer arbitrage to successfully maintain different price tiers. Differentiating customers by demographics or usage volume allows firms to capture additional consumer surplus.
Service industries like airlines and cinemas routinely charge different ticket prices based on booking timing. Consumer advocacy groups scrutinize discriminatory pricing practices to ensure fair treatment in retail markets. Understanding pricing strategies helps economists evaluate market competition and corporate profitability dynamics. Charging different prices based on race represents illegal discrimination rather than standard economic price discrimination. Cost based price variations reflect differing production expenses rather than true economic price discrimination. Cost of service differences justify price variations legitimately rather than satisfying the definition of discrimination.
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