Question

If two identifiable markets differ with respect to their price elasticity of demand and resale is impossible, a firm with market power will Group of answer choices Set price equal to marginal cost in both markets. Set price so as to equate the elasticity of demand across markets. Set a higher price in the market that is more elastic. Set a lower price in the market that is more price elastic.

Answer 1

Answer: Set a lower price in the market that is more price elastic.

Step-by-step explanation:

It would be in the best interest of the firm with market power to set a lower price if the market is more price elastic.

Price elasticity is the measure of how much quantity demanded changes in response to a change in price.

If the firm with market power sets a lower price in a market that is more price elastic, it can expect that the quantity demanded will increase more which can give a higher profit.