Consider a monopolist currently selling output Q to two different markets: Market A and Market B. This monopolist is able to price discriminate and charge different prices in these markets. Let QA and PA be the quantity and price in market A, and QB and PB be the quantity and price in market B. The monopolist is optimally choosing its prices and quantities, in order to maximize profit. The monopolist knows the price elasticity of demand in these markets, and knows that market A is more inelastic than market B. Consider each of the following three statements. What do we know for sure?1) Regarding marginal revenues, we must have MRA > MRB 2) Regarding prices, we must have PA > PB 3) Regarding quantities, we must have QA> QB
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Consider a monopolist currently selling output Q to two different markets: Market A and Market B. Th...
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