CA Foundation P4 · Chapter 4 · Question 9 of 15
A monopolist sells in two separate markets. Price elasticity of demand is 2 in market A and 4 in market B. If the profit-maximising price in market B is Rs. 40, the price in market A will be:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 60
Explanation
In equilibrium MRA = MRB. MR = P(1 - 1/e). So PA(1 - 1/2) = PB(1 - 1/4), i.e., 0.5 PA = 0.75 x 40 = 30, giving PA = Rs. 60. Rs. 80 assumes prices are proportional to the ratio of elasticities (2 x 40), which is incorrect.
More Price Determination in Different Markets MCQs
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