Monopolies will engage in price discrimination if which of the following conditions is met?

• A. There are no barriers to entry in the market.
• B. The firm can prevent resale between customers and has information about their willingness to pay.
• C. The product is sold in perfectly competitive markets.
• D. All consumers have identical demand curves.

Answer: (B)

Verified step by step guidance

1. Understand the concept of price discrimination: it occurs when a monopolist charges different prices to different consumers for the same product, based on their willingness to pay.
2. Identify the necessary conditions for price discrimination: the firm must have some market power (monopoly or imperfect competition), be able to segment the market, and prevent resale between customers.
3. Recognize that preventing resale is crucial because if customers can resell the product, the price differences would be arbitraged away, eliminating the ability to price discriminate.
4. Know that having information about consumers' willingness to pay allows the firm to set different prices tailored to each segment or individual, maximizing profits.
5. Conclude that the correct condition for price discrimination is that the firm can prevent resale and has information about consumers' willingness to pay, while the other options (no barriers to entry, perfect competition, identical demand curves) do not support price discrimination.