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

question 18

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 $6 in one market and $11 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 -0.90. Which of the following actions is sure to raise the monopolist's profits?

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

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Definitions:

Three Figure Accuracy

Refers to rounding numerical values to three significant figures for precision in calculations or reporting.

Pair of Equations

Two mathematical equations set up in relation to each other, often used to find the values of two unknown variables by solving them simultaneously.

Graphically

In a manner that uses diagrams, charts, maps, or other visual representations to explain or illustrate.

Set of Equations

A group of equations that are solved together, where each equation may have multiple variables.