Economics Price Discrimination Questions
The role of market power in price discrimination is significant. Market power refers to the ability of a firm to influence the market price of a product or service. When a firm has market power, it can charge different prices to different groups of consumers based on their willingness to pay. Price discrimination allows the firm to maximize its profits by capturing the consumer surplus and extracting more value from each customer. Without market power, price discrimination would not be possible as the firm would have to accept the prevailing market price.