A Profit-Maximizing Monopolist Is Able to Practice Third-Degree Price Discrimination

question 19

True/False

A profit-maximizing monopolist is able to practice third-degree price discrimination. If he charges p₁ in market 1 and p₂ in market 2, where p₁ > p₂, the quantity sold in market 1 must be smaller than the quantity sold in market 2.

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Definitions:

Mixed Cost

A cost consisting of both fixed and variable components and which is thus partially affected by changes in the level of activity.

Charitable Contribution

Monetary or in-kind donations given to charitable organizations, often eligible for tax deductions.

Sunk Cost

Expenses that were previously incurred and cannot be reclaimed.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, essentially what is sacrificed when a particular choice is made.