A firm that sells on two markets and engages in third-degree price discrimination will increase the quantity sold on each market until marginal revenue is the same on both markets and is equal to marginal cost.

Question

Quizplus · Accepted Answer

In third-degree price discrimination, a firm charges different prices in different markets based on differences in elasticity of demand. The firm will continue to sell in each market until the marginal revenue (MR) from each market is equalized and matches the marginal cost (MC) of production, maximizing profit.

A Firm That Sells on Two Markets and Engages in Third-Degree