The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5

-Refer to Table 11.5. How would a price-discriminating monopolist allocate his or her product between market X and market Y if marginal cost is $40 in both markets?
A)4 units in market X; 1 unit in market Y
B)3 units in market X; 2 units in market Y
C)2 units in market X; 3 units in market Y
D)Nothing in market X; 5 units in market Y
E)5 units in market X; nothing in market Y

Question

The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5
 
-Refer to Table 11.5. How would a price-discriminating monopolist allocate his or her product between market X and market Y if marginal cost is $40 in both markets?
A)4 units in market X; 1 unit in market Y 
B)3 units in market X; 2 units in market Y 
C)2 units in market X; 3 units in market Y 
D)Nothing in market X; 5 units in market Y 
E)5 units in market X; nothing in market Y

Quizplus · Accepted Answer

In a price-discriminating monopoly, the monopolist will allocate its product to the market with the higher marginal revenue. In this case, the marginal revenue in market X is $60 and the marginal revenue in market Y is $50. Therefore, the monopolist will allocate 3 units to market X and 2 units to market Y.

The Following Table Shows the Marginal Revenues Earned by a Price