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Price discrimination by a monopolist is possible only when, among other conditions:
AThe seller is a price taker with no control over supply
BAll sub-markets have identical price elasticities of demand
CBuyers can freely resell the good from one market to another
DSub-markets differ in elasticity and resale between them is prevented
Answer & Solution
Correct answer: D. Sub-markets differ in elasticity and resale between them is prevented
1. Discrimination needs the seller to have price-setting power, ruling out a price taker.
2. The market must split into sub-markets with different elasticities so different prices pay off.
3. If buyers could resell from the cheap to the dear market, arbitrage would erase the price gap.
4. So differing elasticities plus no resale (no arbitrage) are required.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.15_
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