Profit-maximizing price discrimination results in higher prices in those
market segments with less elastic demand. The figure shows two market
segments, each with a different demand curve. At any given price,
demand in segment A is less elastic than demand in segment B. Profit-
maximizing price discrimination requires that in each market
segment.
For each market segment, the table shows different possible prices, and
the associated quantities, revenues, costs, and profits. Marginal costs are
assumed to be $4 for each unit produced. Suppose first that the firm is
unable to price discriminate and thus charges the same price in each
segment. By comparing the total profit in the two segments along any
single row of the table, it is apparent that the single profit-maximizing price
is $11, total output is 56 units, and the resulting total profit is $392, as
MC=MR