Price discrimination is

Question

BlackTom AI · Accepted Answer

Start by restating the core idea being tested: Price discrimination and what it means in economic terms.
Option 1: 'a seller’s requirement that the purchaser of one product also buy another product in the line.' This describes tying or product bundling, not price discrimination, so it’s an incorrect characterization.
Option 2: 'the practice of charging a very low price for a product with the intent of driving competitors out of business.' This is predation or predatory pricing, which aims to eliminate competitors, not the general concept of charging different prices to different buyers.
Option 3: 'an arrangement a manufacturer makes with a reseller to handle only its products and not those of a competitor.' This is exclusive distribution or selective distribution, not price discrimination.
Option 4: 'the practice of charging different prices to different buyers for goods of like grade and quality.' This statement captures the essence of price discrimination, which occurs when the same product is sold at different prices to different customers, often based on willingness to pay, quantity, or segmentation, while the goods remain of similar quality.
Option 5: 'a conspiracy among firms to set prices for a product or service.' This describes price fixing, which is a collusive behavior among competitors, not price discrimination toward individual buyers.
In terms of common economic definitions, only Option 4 aligns with the precise meaning of price discrimination, since it specifies charging different prices to different buyers for goods of like grade and quality, without changing the product itself. The other choices mix in related but distinct concepts such as tying, predatory pricing, exclusive distribution, and price fixing, which do not define price discrimination.
So, the analysis shows that the correct concept corresponding to price discrimination is described in Option 4, while the other options illustrate different pricing or marketing practices that are not price discrimination.

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Price discrimination is

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