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

question 8

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 = $4 in one market and p₂ = $8 in the other market.At these prices, the price elasticity in the first market is -1.90 and the price elasticity in the second market is 20.30.Which of the following actions is sure to raise the monopolist's profits?

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

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Definitions:

Flooding

A psychological treatment method where a person is exposed to their phobia at its worst until the fear diminishes.

Specific Phobias

An irrational fear and avoidance of a particular object or situation that poses little to no actual danger.

Predisposition

A natural inclination or tendency to suffer from a particular condition or exhibit a particular behavior.

Phobic Reactions

Intense, irrational fears of specific objects or situations that lead to avoidance behavior and can significantly disrupt daily functioning.