Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand, the price in the market segment with more-elastic customer demand will be
A)greater than $34.
B)less than $34.
C)less than marginal revenue in that market segment.
D)equal to marginal revenue in that market segment.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups of customers based on their willingness to pay. In this case, the producer is charging a higher price in the market segment with less-elastic demand, which suggests that customers in that segment are willing to pay more for the product. Given that the other segment has more-elastic demand, it is likely that customers in that segment are more price-sensitive and would not be willing to pay as much as $34 for the product. Therefore, the price in the more elastic segment would be less than $34.

Suppose That a Price-Discriminating Producer Divides Its Market into Two