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

question 16

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 $2 in one market and $12 in the other market. At these prices, the price elasticity in the first market is -2.50 and the price elasticity in the second market is -0.70. Which of the following actions is sure to raise the monopolist's profits?

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

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Definitions:

Goal-Setting Theory

An organizational framework positing that specific and challenging goals, along with appropriate feedback, facilitate improved worker performance.

Negative Reinforcement

Strengthens a behaviour by making the avoidance of an undesirable consequence contingent on its occurrence.

Nagging

The act of persistently annoying or finding fault with someone, often to prompt an action or change.

Law of Immediate Reinforcement

A principle stating that a behavior is more likely to be repeated if it is followed immediately by a positive reinforcement.