A third-degree price discriminating monopolist can sell its output either in the

Question

A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). After selling all of its output, the firm discovers that the marginal revenue earned in the local market was $20 while its marginal revenue on the internet auction site was $30. To maximize profits the firm should

A) have sold more output in the local market and less at the internet auction site. B) do nothing until it acquires more information on costs.
C) have sold less output in the local market and more on the internet auction site. D) sell less in both markets until marginal revenue is zero.

E) sell more in both markets until marginal cost is zero.

Explanation / Answer

Solution: have sold less output in the local market and more on the internet auction site

Explanation: Marginal revenue refers to the additional revenue that a firm earns by increasing product sales by one unit. Because the marginal revenue is higher on the internet auction site compared to market thus firm have sold less output in the local market and more on the internet auction site

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