Question

multiple choice question what is the effect on total profit when a firm charges a higher price to groups with inelastic demand and a lower price to groups with elastic demand instead of charging a everyone a single monopoly price? total profit decreases. total profit increases. total profit remains unchanged. total profit becomes negative.

Explanation:

When a firm practices price - discrimination by charging higher prices to inelastic demand groups (who are less responsive to price changes and will still buy) and lower prices to elastic demand groups (to attract more of them), it can capture more consumer surplus and increase its revenue. Since costs remain the same in the short - run, total profit increases.

Answer:

Total profit increases.