Man City took a deserved lead after 22 minutes when Danny O'Donnel brought down Ishmael Miller in the box and Miller himself slotted home the penalty.
It was 2-0 after 37 minutes when Sun Jihai ran onto a through ball, rounded Liverpool goalkeeper David Martin and slotted home into an empty net.
Liverpool's only real chance in the first half came when Daniel Agger fired a 25 yard shot that Nicky Weaver in the City goal was able to palm away.
Things got better for Liverpool in the second half when they were able to create more chances going forward. Danny Guthrie, Adam Hammill and Robbie Foy all saw chances go narrowly wide while Besian Idizaj hit the crossbar late on. In the end it was a disappointing end to what has been a good season for the reserves overall.