Which of the following best describes price discrimination as a pricing strategy?

• A. Setting prices based solely on production costs without considering demand
• B. Charging a single price for all units sold regardless of quantity purchased
• C. Charging different prices to different groups of consumers for the same product based on their willingness to pay
• D. Setting prices below cost to drive competitors out of the market

Answer: (C)

Verified step by step guidance

1. Understand the concept of price discrimination: it involves charging different prices to different consumers or groups for the same product, based on their willingness or ability to pay.
2. Recognize that price discrimination is distinct from pricing strategies that set a single uniform price for all consumers or that base prices solely on production costs.
3. Identify that price discrimination aims to capture more consumer surplus by tailoring prices to different demand elasticities among consumer groups.
4. Eliminate options that describe uniform pricing (same price for all units) or cost-based pricing without demand consideration, as these do not reflect price discrimination.
5. Conclude that the best description of price discrimination is 'Charging different prices to different groups of consumers for the same product based on their willingness to pay.'