DECA+ Business Management and Administration Practice Exam

What is a common outcome of price discrimination?

1. Overall price reductions

2. Increased market competition

3. Varied pricing strategies among consumers

4. Standardized pricing across the board

The correct answer is: Varied pricing strategies among consumers

Price discrimination occurs when a company charges different prices to different consumers for the same product or service, based on their willingness to pay. This practice allows businesses to maximize their profits by capturing consumer surplus—essentially the difference between what consumers are willing to pay and what they actually pay. The correct answer highlights that varied pricing strategies reflect the unique valuations different consumers place on a product. This can result from various factors, such as consumer demographics, purchase timing, or perceived product value. For example, a company might offer discounts to students or seniors, while charging full price to other consumers, thereby catering to diverse consumer segments with differing price sensitivities. This outcome contrasts with other options, where overall price reductions would imply uniformity in pricing that doesn't account for consumers' differing willingness to pay. Increased market competition may arise over time but is not a direct outcome of price discrimination itself; it is more related to how companies compete with one another rather than the pricing strategies used. Similarly, standardized pricing implies a fixed price across the board, which negates the principles of price discrimination where pricing varies by consumer segment.