A monopolist sells the same product in two geographically separated markets, at price in market 1 and at price in market 2. It is known that . Denote the price elasticities of demand for the product in market 1 and market 2 by and respectively. Note that the common marginal cost of manufacturing the good is positive. Then which of the following could be true?
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A monopolist sells the same product in two geographically separated markets, at price P₁ in market 1 and at price P₂ in market 2. It is known that P₁=2P₂. Denote the price elasticities of demand for the product in market 1 and market 2 by e₁ and e₂ respectively. Note that the common marginal cost of manufacturing the good is positive. Then which of the following could be true? (A) e₁ = 1/2, e₂ = 1/2 (B) e₁=3/2, e₂ = 3 (C) e₁ = 3, e₂ = 5 (D) e₁= 1, e₂ = 1
Also written as: A monopolist sells the same product in two geographically separated markets, at price P_1 in market 1 and at price P_2 in market 2. It is known that P_1=2P_2. Denote the price elasticities of demand for the product in market 1 and market 2 by e_1 and e_2 respectively. Note that the common marginal cost of manufacturing the good is positive. Then which of the following could be true?
Monopoly and price discrimination has come up 128 times in 7 exams since 2004.
This question is on Third-degree price discrimination, part of Monopoly and price discrimination in Microeconomics.
Charging different groups different prices, and how elasticities decide which group pays more.
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Question from the JNU SIS 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.