economics hard Fill in the Blank

For a monopolist to successfully practice price discrimination, three conditions must be met: the firm must have market power, it must be able to segment the market based on price elasticity, and it must be able to prevent ___ between the different market segments.

  1. arbitrage (or resale)
  2. low (or zero / no)
  3. lender of last resort
  4. TRIMs (or Trade-Related Investment Measures)

Answer: arbitrage (or resale)

Arbitrage is the act of buying a good cheaply in one segment and reselling it at a higher price in another. If a monopolist charges students $10 and professionals $50 for software, it must use digital locks or ID verification to prevent students from buying bulk licenses and reselling them to professionals. If arbitrage is possible, the price discrimination strategy instantly collapses.

Topic Microeconomics - Price Discrimination
Exam Relevance UPSC Prelims, SSC CGL
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