A Price-Discriminating Monopolist Sells in Two Separate Markets Such That

question 6

Multiple Choice

A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p₁ = $2 in one market and p₂ = $8 in the other market. At these prices, the price elasticity in the first market is -2.20 and the price elasticity in the second market is -0.10. Which of the following actions is sure to raise the monopolist's profits?

• A) Lower p₂.
• B) Raise p₂.
• C) Raise both p₁ and p₂.
• D) Raise p₁ and lower p₂.
• E) Raise p₂ and lower p₁.

Interpret the relationship between market value, book value, and their impact on financial decisions.

Calculate the earnings per share (EPS) before and after corporate actions like dividends, repurchases, and splits.

Understand and calculate the price per share before and after various corporate finance activities.

Analyze the impact of dividend decisions on retained earnings and shareholder equity.

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Definitions:

Carrying Amount

The value at which an asset or liability is recorded on the balance sheet, accounting for depreciation, impairments, and amortization.