If the monopolist can discriminate between buyers, then it is optimal to charge:
A) a higher price to the buyers with high elasticity of demand, and a lower price to the buyers with low elasticity of demand.
B) a lower price to all buyers.
C) a higher price to all buyers.
D) a lower price to the buyers with high elasticity of demand, and a higher price to the buyers with low elasticity of demand.

Question

Quizplus · Accepted Answer

If the monopolist can discriminate between buyers based on their elasticity of demand, they should charge a lower price to buyers with high elasticity of demand and a higher price to buyers with low elasticity of demand. This is because buyers with high elasticity of demand are more likely to switch to substitutes or reduce their demand significantly in response to a price increase, while buyers with low elasticity of demand are less likely to do so. Thus, charging a higher price to buyers with low elasticity of demand will result in greater profits for the monopolist.

If the Monopolist Can Discriminate Between Buyers, Then It Is