Suppose there are two groups, a high-price group and a low-price group. Assume t

Question

Suppose there are two groups, a high-price group and a low-price group. Assume the monopoly has no fixed costs such that operating with a loss corresponds to operating where revenue is less than variable production costs. Also assume that if the monopoly sells to the low-price group, then it will incur losses. With the ability to group price discriminate, the monopoly O A. would not sell to the low-price group because optimal group prices are set jointly. OB. might sell to the low-price group because sales to both groups are interdependent. O C. would not sell to the low-price group because it could just sell to the high price group and avoid losses. O D. would sell to the low-price group because it only cares about combined group profit. OE. might sell to the low-price group to cover a portion of the variable production costs

Explanation / Answer

D, would sell to low price group because it cares about combined group profit.

Monopolist can discriminate between rich and poor and will charge price such that it churn up total surplus in the market.

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