Answer to Question #288685 in Microeconomics for Beautifulhoppe

Question

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

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

Solution:

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. It the price elasticity of demand is more inelastic then price discrimination will be prevalent

 

 

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