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

question 7

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 p₁ = $2 in one market and p₂ = $8 in the other market.At these prices, the price elasticity in the first market is -2.20 and the price elasticity in the second market is -0.10.Which of the following actions is sure to raise the monopolist's profits?

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

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