Suppose group price discrimination is possible but a firm chooses not to and sets the same price in each market. As a result
A)price elasticity of demand is the same in each market.
B)the price-inelastic market will buy zero units.
C)marginal revenue in the more price-elastic market exceeds marginal revenue in the less price-elastic market.
D)the deadweight loss is less than if the firm price discriminated.

Question

Quizplus · Accepted Answer

When a firm sets the same price in each market without practicing group price discrimination, the marginal revenue in the more price-elastic market exceeds that in the less price-elastic market. This is because, in the more price-elastic market, a small decrease in price leads to a larger increase in quantity sold, enhancing marginal revenue compared to the less price-elastic market where the same price reduction leads to a smaller increase in quantity sold.

Suppose Group Price Discrimination Is Possible but a Firm Chooses