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

question 13

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 $8 in the other market.At these prices, the price elasticity in the first market is -2.10 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)Raise both p₁ and p₂.
• B)Raise p₂.
• C)Lower p₂.
• D)Raise p₁ and lower p₂.
• E)Raise p₂ and lower p₁.

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Definitions:

Profit Margin

A financial metric that measures the percentage of revenue that exceeds the cost of goods sold, indicating the profitability of a company.

Return On Sales

A ratio used to evaluate a company's operational efficiency, calculated by dividing operating profit by sales revenue.

Accrual Accounting

A financial recording approach that documents incomes and expenditures at the time they happen, irrespective of the actual cash flow.

Accrued Revenues

Income that has been earned but not yet received, recorded as an asset on the balance sheet to reflect sales that have taken place.