Hendry Products charges Montgomery Meats a lower price for goods because the owners of both companies are on the same soccer team. Hendry charges other firms similar to Montgomery Meats more for the same products and this is beginning to hurt the business of the other firms. In fact, Montgomery is taking so much business away from the others due to its lower prices that the other firms are in danger of going out of business. This is an example of:

a. price discrimination.
b. price reversal.
c. price-cutting.
d. price maintenance.

a. price discrimination.

Explanation:

Price discrimination is pricing strategy where different prices are charged to different customers for the same product or service based on what the seller thinks he can get from each of them.

There are 3 types of price discrimination:

-First degree: is price discrimination where firm charges different price for every unit sold. Also called perfect discrimination.

-Second degree: is discrimination where the firm charges different prices for different quantities.

-Third degree: is when the seller charges different price for different consumer groups.

Hendry Products charges Montgomery Meats a lower price, and charges other firms similar to Montgomery Meats more for the same products. Hendry Products is practicing third degree price discrimination.

A) Price Discrimination

Explanation:

What Is Price Discrimination?

Price discrimination is a selling technique that charges customers distinct prices for the same product or service based on what the merchant believes they can get the customer to agree to. In pure price discrimination, the seller charges every customer the maximum price he or she will pay. Pure price discrimination is familiar forms of price discrimination, the vendor positions customers in groups based on specific attributes and charges each group a different price.

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