Suppose a profit-maximizing monopoly is able to employ multimarket price discrimination.The marginal cost of providing the good is constant and the same in both markets.The marginal revenue the firm earns on the last unit sold in the market with the lower price will be
A) greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
B) less than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
C) equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price.
D) greater than the marginal cost of the last unit.

Question

Quizplus · Accepted Answer

In multimarket price discrimination, a profit-maximizing monopoly will set the marginal revenue (MR) equal across all markets. This is because the firm will continue to reallocate sales from one market to the other until the MR in both markets is equal, ensuring profit maximization. Therefore, the MR from the last unit sold in both the lower-priced and higher-priced markets will be equal.

Suppose a Profit-Maximizing Monopoly Is Able to Employ Multimarket Price