Asked by Yasmin Garcia on May 11, 2024
Verified
If a monopolist engages in price discrimination,it will:
A) realize a smaller profit.
B) charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.
C) produce a smaller output than when it did not discriminate.
D) charge a competitive price to all its customers.
Price Discrimination
A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider to different consumers.
Demand Elasticity
An assessment of the sensitivity of demand for a product to shifts in its price.
Monopolist Engages
Refers to actions taken by a monopolistic firm to maintain or enhance its market power, which can include setting prices or limiting supply.
- Explore the theory of price discrimination, detailing its conditions and repercussions.
Verified Answer
MJ
Mausam JariwalaMay 17, 2024
Final Answer :
B
Explanation :
Price discrimination allows a monopolist to charge a higher price where individual demand is inelastic (less sensitive to price changes) and a lower price where individual demand is elastic (more sensitive to price changes). This allows the monopolist to capture more consumer surplus and increase its overall profits.
Learning Objectives
- Explore the theory of price discrimination, detailing its conditions and repercussions.