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

question 15

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 = $5 in one market and p₂ = $10 in the other market. At these prices, the price elasticity in the first market is -1.40 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 p₁ and lower p₂.
• D) Raise both p₁ and p₂.
• E) Raise p₂ and lower p₁.

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