If arbitrage becomes extensive, a price-discriminating monopolist selling its patented drug in two markets will:
A) quit selling the product in the market with the inelastic demand.
B) begin to charge the same price in both markets.
C) increase the price in the inelastic market and lower the price in the elastic market.
D) raise the price in both markets.

Question

Quizplus · Accepted Answer

If arbitrage becomes extensive, the price differential between the two markets will disappear due to competition. In this scenario, the monopolist will start charging the same price in both markets to maximize their profit.

If Arbitrage Becomes Extensive, a Price-Discriminating Monopolist Selling Its Patented