Suppose that quantity demanded is 2000 when price is $10 and 3000 when price is $5.If a monopolist who was initially charging a price of $10 discovers a way to divide consumers into two groups and charge one group a higher price,it will be able to increase revenue from $20,000 to
A) $25,000 by charging consumers with the lower reservation price only $5 and keeping the price for consumers with the higher reservation price at $10.
B) $35,000 by charging consumers with the higher reservation price only $5 and keeping the price for consumers with the lower reservation price at $10.
C) $25,000 by charging consumers with the higher reservation price only $5 and keeping the price for consumers with the lower reservation price at $10.
D) $35,000 by charging consumers with the lower reservation price only $5 and keeping the price for consumers with the higher reservation price at $10.
E) $45,000 by charging all consumers the higher price.

Question

Quizplus · Accepted Answer

By charging $10 to the group with a higher reservation price (2000 units) and $5 to the group with a lower reservation price (1000 units), the monopolist can earn $20,000 + $5,000 = $25,000.

Suppose That Quantity Demanded Is 2000 When Price Is $10