Suppose a Firm Produces Identical Goods for Two Separate Markets

question 111

Multiple Choice

Suppose a firm produces identical goods for two separate markets and practices third-degree price discrimination. In the first market the firm charges $30 per unit, and it charges $22 per unit in the second market. Which of the following represents the ratio of price elasticities of demand in the two markets?

• A) E2 = (21/29)E1
• B) E2 = (29/21)E1
• C) E2 = E1
• D) E2 = (22/30)E1
• E) none of these

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