If a price-discriminating monopoly charges a lower price to individuals in city X, it is likely that the firm
A)believes that the demand of individuals in city X is relatively inelastic.
B)believes that the demand of individuals in city X is relatively elastic.
C)wants to shift the demand of individuals in city X.
D)cares about the well-being of the individuals in city X.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups based on their elasticity of demand. A lower price is charged to those with a relatively elastic demand to increase quantity sold, as these consumers are more sensitive to price changes.

If a Price-Discriminating Monopoly Charges a Lower Price to Individuals