Consider two markets segments,X and Y,for product A.The price elasticity of demand for product A in market X is 1.5,while the same in market Y is 3.The monopolist is selling product A in both the markets at a price of $300.Which of the following statements is true about the marginal revenue earned by the non-price discriminating monopolist from the two markets?
A)The monopolist earns $77.78 more from market Y.
B)The monopolist earns $99.9 more from market X.
C)The monopolist earns $88.89 more from market Y.
D)The monopolist earns $11.11 more from market X.

Question

Quizplus · Accepted Answer

The formula for marginal revenue is given as MR=P(1-1/e), where P is the price and e is the price elasticity of demand.
For market X, MR_X=300(1-1/1.5)= $100.
For market Y, MR_Y=300(1-1/3)= $200.
Therefore, the monopolist earns $100 more from market Y than market X. Hence, option A is the correct answer.

Consider Two Markets Segments,X and Y,for Product A