Answer to Question #288334 in Microeconomics for Swazi bear

Question

Does a monopoly's ability to price discriminate between two groups of consumers depend on its marginal cost curve? Why or why not? Consider two cases

a) the marginal cost is so high that the monopoly is uninterested in selling to one group

b) the marginal cost is low enough that the monopoly wants to sell to both groups

Answer 1

a) If the marginal cost is so high that the monopoly is uninterested in selling to one group, then the price discrimination is more probable. But it also depends on price elasticity of demand.

b) If the marginal cost is low enough that the monopoly wants to sell to both groups, then the price discrimination is less probable.