Question

Suppose a monopolist produces two different products. If the marginal cost of producing one is lower...

Suppose a monopolist produces two different products. If the marginal cost of producing one is lower than the marginal cost of producing the other, and the monopolist charges a different price for the two goods, then the monopolist is:

Multiple Choice

  • not maximizing its profit.

  • imperfectly price discriminating.

  • not price discriminating.

  • perfectly price discriminating.

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Homework Answers

Answer #1

Perfect price discrimination occurs when the mononpolist charges the maximum possible price for each unit of the goods from the consumers.

Imperfect price discrimination occurs when the mononpolist charges different prices in different market due to elasticity of demand is different in the different market for maximising the profit.

When a monopolist produces two different products. If the marginal cost of producing one is lower than the marginal cost of producing the other, and the monopolist charges a different price for the two goods, then the monopolist is imperfectly price discriminating.

Hence option second is the correct answer.

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