A price-discriminating monopolist divides its customers into two segments based on price elasticity of demand.If it sells its product for a price of $42 in the market segment where demand is relatively less price elastic,the price in the market segment where demand is more price elastic will be _____
A)$42.
B)greater than $42.
C)less than $42.
D)less than the marginal revenue in that market segment.
E)equal to the marginal revenue in that market segment.

Question

Quizplus · Accepted Answer

Since the monopolist is price-discriminating, it charges different prices to different segments of customers based on their price elasticity of demand. It charges a higher price to the segment with inelastic demand and a lower price to the segment with elastic demand. If the monopolist charges $42 in the less elastic market segment, then in the more elastic market segment, it will charge a lower price to attract more customers. Therefore, the price in the more elastic market segment will be less than $42. Option C is the best choice.

A Price-Discriminating Monopolist Divides Its Customers into Two Segments Based