What is price discrimination, and how does it result in hospitals charging diffe

Question

What is price discrimination, and how does it result in hospitals charging different price markups?

A. Price discrimination means charging those who are least able to afford care the highest prices.

B. Price discrimination means charging Medicare and Medicaid programs as much as possible because the government does not spend its money wisely.

C. Price discrimination means charging higher prices during peak seasons, such as the flu season when more people become ill, because the hospital must increase its staffing for those periods.

D. Price discrimination means charging a profit-maximizing price to each group on the basis of the price sensitivity of each group.

Explanation / Answer

Answer.) D. Price discrimination means charging a profit-maximizing price to each group on the basis of the price sensitivity of each group.

Price discrimination is the practice of charging different markups for the same product.Price discrimination can result if a firm charges different prices for the same product or prices closely related products in such a manner that price differences are not proportional to cost differences. The primary requirement for price discrimination is an ability to segment the market by preventing transfers among sub-markets. The second requirement for price discrimination to be worthwhile is that demand elasticities must be different in the various sub-markets. higher prices are charged to the less price-sensitive groups. Otherwise, an optimal pricing scheme will result in equal prices in all markets.  

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