If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible,a firm with market power will
A) set a higher price in the market that is more price elastic.
B) set a lower price in the market that is more price elastic.
C) set price so as to equate the elasticity of demand across markets.
D) set price equal to marginal cost in both markets.

Question

Quizplus · Accepted Answer

A firm with market power will set a lower price in the market that is more price elastic because consumers in that market are more sensitive to price changes, and a lower price is necessary to sell a significant quantity.

If Two Identifiable Markets Differ with Respect to Their Price