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:

Society

A group of individuals involved in persistent social interaction, or a large social group sharing the same geographical or social territory, typically subject to the same political authority and dominant cultural expectations.

Utilitarianism

An ethical theory that posits the best action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Welfare

Governmental provision of economic assistance to individuals in need.

Well-being

A state of being comfortable, healthy, or happy, often considered holistically including physical, mental, and social aspects.