A Price-Discriminating Monopolist Sells in Two Separate Markets Such That

Multiple Choice

A price-discriminating monopolist sells in two separate markets such that goods sold in one market are never resold in the other. It charges $2 in one market and $12 in the other market. At these prices, the price elasticity in the first market is -2.50 and the price elasticity in the second market is -0.70. Which of the following actions is sure to raise the monopolist's profits?

A) Raise p₂.
B) Raise both p₁ and p₂.
C) Lower p₂.
D) Raise p₁ and lower p₂.
E) Raise p₂ and lower p₁.