Asked by Sarah Saintilus on Jun 11, 2024
Verified
A price-discriminating monopolist charges p1 in market 1 and p2 in market 2.If p1 p2, the absolute value of the price elasticity in market 1 at price p1 must be smaller than the absolute value of the price elasticity in market 2 at price p2.
Price-Discriminating Monopolist
A monopolist that charges different prices to different consumers for the same product, based on their willingness to pay, to maximize profits.
Absolute Value
The value of a number excluding its sign, ensuring it is not negative.
Different Prices
Different prices refer to varying costs for goods or services, often based on factors such as location, demand, and quality.
- Realize the essential function of demand elasticity within pricing strategies for entities with monopolistic power.
Verified Answer
KK
Kenzie KimesJun 13, 2024
Final Answer :
True
Explanation :
This statement is true because if the monopolist is charging a higher price in market 1 than in market 2, it means that market 1 is less price sensitive. Therefore, the absolute value of the price elasticity in market 1 at price p1 must be smaller than the absolute value of the price elasticity in market 2 at price p2.
Learning Objectives
- Realize the essential function of demand elasticity within pricing strategies for entities with monopolistic power.