Final answer:
To maximize profits, a monopolist selling in two different markets with non-identical demand should engage in price discrimination, setting different prices in each market by equating marginal revenue with marginal cost. This approach captures more consumer surplus and increases potential profits. The Correct Answer is Option.B.
Step-by-step explanation:
A monopolist aiming to maximize profits in two different markets with non-identical demand curves will need to practice price discrimination. This requires setting different prices for similar goods based on varying demand elasticities. A monopolist can find the profit-maximizing level of output and prices by equating marginal revenue (MR) with marginal cost (MC) in each respective market. The correct practice enables the firm to capture consumer surplus that would otherwise go unrealized and produce a higher level of output compared to no discrimination, effectively increasing total profits.
It's important to note that selling below the cost of production or equalizing sales volumes across markets is not necessary for maximum profit. What matters is that the MR equals MC within each market. Price discrimination also helps in avoiding losses below average variable costs (AVC), which would necessitate shutting down production.