10. Price discrimination refers to:
A. selling a given product for different prices at two different points in time.
B. any price above that which is equal to a minimum average total cost.
C. the selling of a given product at different prices that do not reflect cost differences.
D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.

Question

10.    Price discrimination refers to:
A.    selling a given product for different prices at two different points in time.
B.    any price above that which is equal to a minimum average total cost.
C.    the selling of a given product at different prices that do not reflect cost differences.
D.    the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.

BlackTom AI · Accepted Answer

Let’s break down what price discrimination means in economics and evaluate each option against that concept.
Option A: 'selling a given product for different prices at two different points in time.' This describes price changes over time, such as discounting or dynamic pricing, but price discrimination is about charging different prices to different buyers, not simply changing prices over time for everyone. So this is not the standard definition.
Option B: 'any price above that which is equal to a minimum average total cost.' This statement confuses pricing with cost concepts. Price discrimination is not about charging prices above a minimum ATC; it’s about charging different prices to different groups or consumers, regardless of whether costs are minimized. Therefore this is incorrect.
Option C: 'the selling of a given product at different prices that do not reflect cost differences.' This matches the classic definition of price discrimination: identical or similar goods sold at different prices that are not tied to different costs of production, typically to capture more consumer surplus from different market segments. This is the correct interpretation.
Option D: 'the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.' This compares prices across market structures rather than describing the practice of charging different prices to different buyers. It misunderstands price discrimination as a comparative outcome between market types, which is not the core concept. Hence it is incorrect.

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