Question 22
Market StructuresA monopolist will practise price discrimination in two markets if
- A.the cost of separating the markets is large
- B.the markets have different elasticities of demand
- C.there is free flow of information in the two markets
- D.there is a patent of the commodity.
Show the answer and explanation
Answer: B (the markets have different elasticities of demand)
Explanation
Price discrimination pays only when buyers in the separate markets respond differently to price, i.e. their elasticities of demand differ.