Exhibit 9-11
-If the monopolist in Exhibit 9-11 engages in perfect price discrimination, profit-maximizing output would be
A) 700 units
B) 810 units
C) 884 units
D) 976 units
E) 1,000 units

Question

Exhibit 9-11 
-If the monopolist in Exhibit 9-11 engages in perfect price discrimination, profit-maximizing output would be
A) 700 units 
B) 810 units 
C) 884 units 
D) 976 units 
E) 1,000 units

Quizplus · Accepted Answer

Perfect price discrimination occurs when the monopolist charges each customer their maximum willingness to pay. In this case, the monopolist's marginal revenue curve is the same as the demand curve. We can see from the graph that at an output of 884 units, the marginal revenue (MR) equals the marginal cost (MC). At any output level above or below 884 units, the MR is either greater or less than MC, respectively. Therefore, 884 units is the profit-maximizing output level for a monopolist engaging in perfect price discrimination.

Exhibit 9-11 -If the Monopolist in Exhibit 9-11 Engages in Perfect Price