Economics and Monopoly?

Question

A perfect price discriminating monopoly produces ____________.

the same quantity as a single-price monopoly

the same quantity of output as a perfectly competitive industry

a larger output than a perfectly competitive industry

an output at which marginal revenue exceeds marginal cost

Answer 1

C or D, I'm not sure without doing some review.  Price competition allows a firm to improve their profitability because they can charge prices to some of their customers that exceed the point where MR = MC.  But if D is true, then I think C would also be true.   So if only one can be true, then I would look more carefully at D to see if marginal cost somehow changes as well under the discriminating price.  I don't see it happening that way, but you have to be logical.

Bottom line is price discrimination is an advantage and results in greater profits, assuming the basis is carefully managed to not create consumer resentment.