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Can a perfectly competitive firm successfully price discriminate? Hint: What does the demand curve look like...

Can a perfectly competitive firm successfully price discriminate? Hint: What does the demand curve look like for a perfectly competitive firm?

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Answer #1

No, a perfectly competitive firm cannot price discrimate.

Remember the demand curve of the perfect competitive firm is horizontal , i.e perfectly elastic. The firm must produce at ATC=MC=P. This is the reason why perfectly competitive firms cannot earn economic profits. Also price discrimination is not possible because of the fact that there is no product differentiation and consumers having perfect knowledge will never pay premium.

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