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Answer to Question #49391 in Microeconomics for susie

Question #49391
A perfectly competitive firm is not able to successfully price discriminate because:
it breaks even in the long run and therefore can not afford to engage in yield management
it does not advertise and this prevents it from marketing its product to different segments of the market
consumers in perfectly competitive markets have the same maximum willingness to pay for units of the good
the firm will not be able to sell units to any group of consumers that are confronted with prices above the market price
Expert's answer
Price discrimination or price differentiation is a pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets or territories. Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers' willingness to pay. So, a perfectly competitive firm is not able to successfully price discriminate because consumers in perfectly competitive markets have the same maximum willingness to pay for units of the good. That's why the right answer is c).

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