Asked by Sarah Albertson on Jun 13, 2024
Verified
A profit-maximizing monopolist practices third-degree price discrimination.If he charges p1 in market 1 and p2 in market 2, where p1 p2, then if the law forced him to charge the same price in both markets, more would be demanded in market 1 than in market 2.
Third-Degree Price Discrimination
A pricing strategy where a seller charges different prices to different customer groups based on attributes like age, location, or income.
Profit-Maximizing Monopolist
A single seller in a market who determines the optimal level of output and price to maximize profits, facing no competition.
Same Price
A situation where different products, services, or commodities are sold for an identical amount of money.
- Recognize the situations in which a monopolist prefers a single-price approach as opposed to employing price discrimination.
Verified Answer
JW
Jacob WilliamsJun 20, 2024
Final Answer :
False
Explanation :
If the monopolist is forced to charge the same price in both markets, he would charge a price equal to the average of p1 and p2, which is [(p1 + p2)/2]. Since p1 > p2, this means that the new price would be closer to p1. As a result, there would be more demand in market 2 than in market 1. Therefore, the statement in the question is false.
Learning Objectives
- Recognize the situations in which a monopolist prefers a single-price approach as opposed to employing price discrimination.