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Same APK for free and paid versions of Android Market?

Can I list a single APK on the Google Android Market for free and paid versions?

So far, I have found this tip to create a button in the free version that links to paid versions, but IIUC are still two separate APKs.

I also found a link to create free / paid versions from the same code, but this still applies to 2 separate APKs.

What interests me is the (Google) Android Market, to provide functionality similar to PayPal MPL (i.e., one application does everything). Is it possible?

EDIT: . Based on the answer below, Google In-App Billing seems to facilitate this.

However, LVL Requirements and Limitations says:

Licensing is currently for paid applications only, since free applications are considered licensed for all users. If your application is already published as free, you will not be able to download a new version that uses licensing.

I know that LVL is not the same as In-App Billing, but for definiteness, In-App Billing definitely requires LVL (if only to use the key). So how is this reconciling?

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