In order to maximize his profits, a monopolist who practices third-degree price discrimination with two or more markets should charge higher prices in markets with more inelastic demand functions.

Question

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When practicing third-degree price discrimination, a monopolist charges different prices in different markets based on the elasticity of demand in each market. In markets with more inelastic demand, the monopolist can charge a higher price without losing too many customers, while in markets with more elastic demand, the monopolist needs to charge a lower price to avoid losing customers to competitors. Therefore, the monopolist should charge higher prices in markets with more inelastic demand functions in order to maximize profits.

In Order to Maximize His Profits, a Monopolist Who Practices