Which of the following is true of a price-discriminating monopolist who is selling output in two distinct markets?
A)Price will be higher in the market in which demand is unit-elastic.
B)Price will be lower in the market in which demand is more elastic.
C)Price will be equal in each market,as long as there is a constant marginal cost.
D)Price will be lower in the market for which there are fewer substitute goods.

Question

Quizplus · Accepted Answer

A price-discriminating monopolist will charge a higher price in the market with less elastic demand and a lower price in the market with more elastic demand. This is because consumers in the less elastic market are less responsive to price changes, so the monopolist can charge a higher price without losing many sales. In contrast, in the more elastic market, consumers are more responsive to price changes, so the monopolist needs to lower the price to sell more units.

Which of the Following Is True of a Price-Discriminating Monopolist