A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other.It charges $4 in one market and $9 in the other market.At these prices, the price elasticity in the first market is -1.50 and the price elasticity in the second market -0.40.Which of the following actions is sure to raise the monopolist's profits? A)Lower p₂. B)Raise p₂. C)Raise p₁ and lower p₂. D)Raise both p₁ and p₂. E)Raise p₂ and lower p₁.

Question

Quizplus · Accepted Answer

The monopolist should raise the price in the second market because the demand is inelastic (elasticity of -0.40), meaning consumers are less sensitive to price changes, allowing the monopolist to increase revenue and profits by raising the price.

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