Use the figure below to answer the following questions. Figure 12.4.2
-If a firm practises perfect price discrimination,
A)its marginal cost curve is horizontal.
B)it maximizes total revenue.
C)it does not produce the quantity at which marginal revenue equals marginal cost.
D)it produces the quantity at which the marginal revenue curve intersects the average total cost curve.
E)it produces the quantity at which the marginal cost curve intersects the demand curve.

Question

Use the figure below to answer the following questions.  Figure 12.4.2
-If a firm practises perfect price discrimination,
A)its marginal cost curve is horizontal. 
B)it maximizes total revenue. 
C)it does not produce the quantity at which marginal revenue equals marginal cost. 
D)it produces the quantity at which the marginal revenue curve intersects the average total cost curve. 
E)it produces the quantity at which the marginal cost curve intersects the demand curve.

Quizplus · Accepted Answer

If a firm practices perfect price discrimination, it charges each individual customer the highest price they are willing to pay for the product, resulting in a different price for every unit sold. Therefore, the demand curve for the firm in this case is equal to the marginal revenue curve. In order to maximize profits, the firm should produce the quantity at which the marginal cost curve intersects the demand curve, which is represented by point E in the diagram. Therefore, the correct choice is E: it produces the quantity at which the marginal cost curve intersects the demand curve.

Use the Figure Below to Answer the Following Questions