Which of the following is a way in which firms practice price discrimination?

• A. Charging different prices to different groups based on their willingness to pay
• B. Setting a single uniform price for all customers
• C. Selling products at cost to maximize market share
• D. Offering discounts only during off-peak hours

Answer: (A)

Verified step by step guidance

1. Understand the concept of price discrimination: it occurs when a firm charges different prices to different consumers for the same product, based on differences in their willingness to pay or other characteristics.
2. Identify the key feature of price discrimination, which is charging different prices to different groups rather than a single uniform price for all customers.
3. Evaluate each option by comparing it to the definition of price discrimination: setting a single uniform price is not price discrimination; selling at cost to maximize market share is a pricing strategy but not price discrimination; offering discounts during off-peak hours can be a form of price discrimination if it targets different willingness to pay.
4. Recognize that charging different prices to different groups based on their willingness to pay directly matches the definition of price discrimination.
5. Conclude that the correct way firms practice price discrimination is by charging different prices to different groups based on their willingness to pay.