A profit-maximizing monopolist practices third-degree price discrimination. If he charges p₁ in market 1 and p₂ in market 2, where p₁ p₂, then if the law forced him to charge the same price in both markets, more would be demanded in market 1 than in market 2.

Question

A profit-maximizing monopolist practices third-degree price discrimination. If he charges p₁ in market 1 and p₂ in market 2, where p₁ > p₂, then if the law forced him to charge the same price in both markets, more would be demanded in market 1 than in market 2.

Quizplus · Accepted Answer

When a monopolist practices third-degree price discrimination, they charge different prices in different markets based on the willingness to pay of consumers in each market. If they were forced to charge the same price in both markets, they would likely choose a price somewhere in between p₁ and p₂, which would not necessarily lead to more demand in market 1 than in market 2. It would depend on the specific characteristics and demand patterns in each market.

A Profit-Maximizing Monopolist Practices Third-Degree Price Discrimination