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

If the monopolist is forced to charge the same price in both markets, he would charge a price equal to the average of p₁ and p₂, which is [(p₁ + p₂)/2]. Since p₁ > p₂, this means that the new price would be closer to p₁. As a result, there would be more demand in market 2 than in market 1. Therefore, the statement in the question is false.

A Profit-Maximizing Monopolist Practices Third-Degree Price Discrimination