3. When firms are price searchers, why will marginal revenue (MR) be less than price? 4. Is price discrimination harmful to the economy? How does price discrimination affect the total amount of gains from exchange? Explain. Why do colleges often charge students different prices, based on their family income?

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Price Discrimination

Price discrimination or differential pricing is based on the principle that the seller will charge the buyer a price based on the buyer’s ability and willingness to pay for the product rather than applying uniform pricing for all.