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JAMB Economics 1991 Question 22

Question 22

Market Structures

Which of the following statements must hold if price discrimination is to be possible?

  1. A.Elasticities in the various markets must not differ
  2. B.The seller must recognize the possibility of resale
  3. C.The markets must not be separated but integrated
  4. D.The markets should be separable and there should be no resale
Show the answer and explanation

Answer: D (The markets should be separable and there should be no resale)

Explanation

Charging different prices only works if the markets can be kept apart so buyers in the cheap market cannot resell to the dear one.