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

question 17

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 $4 in one market and $9 in the other market. At these prices, the price elasticity in the first market is -1.50 and the price elasticity in the second market is -0.40. 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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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, often used as an accounting standard or a minimum value.

Common Stock

A type of equity ownership in a corporation, representing a claim on part of the company's earnings and assets, with voting rights on corporate matters.

Journal Entry

A record in accounting that represents a transaction in the ledgers.

Transactions

Financial activities involving the exchange of assets, services, or financial instruments between parties.