Question

Market A and Market B currently charging the same price in both markets At the price the firm is charging, MR(Q A ) < MR(Q B ). You believe the markets are separated sufficiently to prevent price arbitrage between them. You would recommend that the firm should _______ its price in Market A and ________ its quantity sold in Market B (adjusting its price as necessary in that market).

Answer 1

Increase, keep constant.

Explanation:

Remember, MR(Q A ) is paying less than his counterpart, thus it creates the need for making it fare for both.

The quantity supplied in market B should be kept constant, because Mr(QB) demand likely changes only if there is a price reduction.