How often do perfectly competitive firms engage in price discrimination? LO12.6 a. Never b. Rarely c. Often d. Always

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How often do perfectly competitive firms engage in price discrimination? LO12.6 a. Never b. Rarely c. Often d. Always

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How often do perfectly competitive firms engage in price discrimination? LO12.6 a. Never b. Rarely c. Often d. Always

Answer and explanationsSolution by a verified expert

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Explanation
a is correct
In a perfectly competitive market, there are many sellers. No single firm or seller can influence the market price. The firms are price takers, thus they can sell the entire market quantity produced at the prevailing market price and need not reduce its price to sell extra units. Thus, they cannot practice price discrimination.

b is incorrect
A perfectly competitive firm can never engage in price discrimination because it would reduce the volume of sales directly to zero.

c is incorrect
No commodity could be sold at a higher or lower price. Again, the perfectly competitive firm need not reduce its price to sell extra units since it can sell everything at the existing price.

d is incorrect
The monopolist tends to practice price discrimination always. A perfectly competitive firm can never practice price discrimination.

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