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

-When practicing price discrimination, a firm can increase its revenue by:
A)charging a higher price to the customers with a more inelastic demand.
B)charging a higher price to the customers with a perfectly elastic demand.
C)supplying more in a market with a more inelastic demand.
D)supplying less in a market with lower elasticity of demand.
E)charging a lower price in a market dominated by wealthy consumers.

Question

The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5
 
-When practicing price discrimination, a firm can increase its revenue by:
A)charging a higher price to the customers with a more inelastic demand. 
B)charging a higher price to the customers with a perfectly elastic demand. 
C)supplying more in a market with a more inelastic demand. 
D)supplying less in a market with lower elasticity of demand. 
E)charging a lower price in a market dominated by wealthy consumers.

Quizplus · Accepted Answer

Price discrimination allows the firm to charge different prices to different segments of customers depending on their willingness to pay. By charging a higher price to the customers with a more inelastic demand (i.e. less price sensitive), the firm can increase its revenue as those customers are willing to pay a higher price. This is reflected in the table, where the marginal revenue is higher in the market with a more inelastic demand.

The Following Table Shows the Marginal Revenues Earned by a Price