Which of the following is true about a perfect price discriminating monopolist?

Choose 1 answer:

A It produces a quantity that maximizes consumer surplus.
(B) It minimizes average total cost
(c) It creates deadweight loss by producing a quantity where price is greater than marginal cost.

D It charges the same price to all buyers
(E) It produces the same quantity as a perfectly competitive firm with the same costs.

Question

Which of the following is true about a perfect price discriminating monopolist?

Choose 1 answer:

A It produces a quantity that maximizes consumer surplus.
(B) It minimizes average total cost
(c) It creates deadweight loss by producing a quantity where price is greater than marginal cost.

D It charges the same price to all buyers
(E) It produces the same quantity as a perfectly competitive firm with the same costs.

Accepted Answer

∻Solution∻ ‖ a ⋮ Perfect Price Discrimination: A perfect price discriminating monopolist charges each consumer the maximum price they are willing to pay, capturing all consumer surplus as profit. ‖ ‖ b ⋮ Quantity Produced: In perfect price discrimination, the monopolist produces the same quantity as a perfectly competitive firm with the same costs because it eliminates deadweight loss by equating marginal cost (MC) to marginal revenue (MR). ‖ ‖ c ⋮ Deadweight Loss: Since the monopolist captures all consumer surplus and produces where $P = MC$, there is no deadweight loss. ‖ ‖ d ⋮ Incorrect Options: - Option A is incorrect because consumer surplus is zero. - Option B is incorrect because minimizing average total cost is not the goal. - Option C is incorrect because there is no deadweight loss. - Option D is incorrect because the monopolist charges different prices to different consumers. ‖ ∻Answer∻ ⚹ E: It produces the same quantity as a perfectly competitive firm with the same costs. ⚹ ∻Key Concept∻ ⚹ Perfect Price Discrimination ⚹ ∻Explanation∻ ⚹ A perfect price discriminating monopolist produces the same quantity as a perfectly competitive firm with the same costs, eliminating deadweight loss and capturing all consumer surplus as profit. ⚹◊What impact does perfect price discrimination have on consumer surplus in the context of a monopoly?⍭ Generate me a similar question◊

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