.A price-discriminating monopolist sells in two separate markets such that goods sold in one market are...

.A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges p1 = £4 in one market and p2 = £8 in the other market. At these prices, the price elasticity in the first market is –0.90 and the price elasticity in the second market is –1.30. Which of the following actions is sure to raise the monopolist’s profits?

a. Raise p1.

b. Raise p1 and lower p2.

c. Lower p2.

d. Raise both p1 and p2.

e. Raise p2 and lower p1.

Expert Solution

b) rise p1 and lower p2

Rahul Sunny answered 2 years ago

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