A profit-maximizing monopolist is able to practice third-degree price discrimination.If he charges p₁ in market 1 and p₂ in market 2, where p₁ p₂, the quantity sold in market 1 must be smaller than the quantity sold in market 2.

Question

A profit-maximizing monopolist is able to practice third-degree price discrimination.If he charges p₁ in market 1 and p₂ in market 2, where p₁ > p₂, the quantity sold in market 1 must be smaller than the quantity sold in market 2.

Quizplus · Accepted Answer

The quantity sold in each market depends on the demand elasticity in each market, not just on the prices charged. A higher price in market 1 does not necessarily mean a smaller quantity sold compared to market 2, as demand elasticity could differ significantly between the two markets.

A Profit-Maximizing Monopolist Is Able to Practice Third-Degree Price Discrimination