A profit-maximizing monopolist is able to practice third-degree price discrimination. If he charges p₁ in market 1 and p₂ in market 2, where p₁ p₂, the quantity sold in market 1 must be smaller than the quantity sold in market 2.

Question

A profit-maximizing monopolist is able to practice third-degree price discrimination. If he charges p₁ in market 1 and p₂ in market 2, where p₁ > p₂, the quantity sold in market 1 must be smaller than the quantity sold in market 2.

Quizplus · Accepted Answer

The quantity sold in each market depends on the elasticity of demand, not directly on the price levels. A higher price in market 1 suggests a less elastic demand, which could result in a smaller or larger quantity sold compared to market 2, depending on the specific demand curves.

A Profit-Maximizing Monopolist Is Able to Practice Third-Degree Price Discrimination