Suppose a profit-maximizing monopoly is able to employ group price discrimination. The marginal cost of providing the good is constant and the same in both markets. The marginal revenue the firm earns on the last unit sold in the market with the lower price will be
A)greater than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
B)less than the marginal revenue the firm earns on the last unit sold in the market with the higher price.
C)equal to the marginal revenue the firm earns on the last unit sold in the market with the higher price.
D)greater than the marginal cost of the last unit.

Question

Quizplus · Accepted Answer

In a scenario of group price discrimination where the marginal cost is constant across markets, a profit-maximizing monopoly will set the marginal revenue (MR) equal across all markets. This is because the firm aims to equate the MR from the last unit sold in each market to the marginal cost (MC), maximizing profit across the board. Therefore, the MR from the last unit sold in the lower-priced market will be equal to the MR from the last unit sold in the higher-priced market.

Suppose a Profit-Maximizing Monopoly Is Able to Employ Group Price