The reason a monopolist has an incentive to price discriminate is that
A) some consumers,who are unwilling to pay the uniform monopoly price,are willing to pay more than the marginal cost.
B) he can always use his market power to charge different prices.
C) his marginal cost will be lower when he price discriminates.
D) it causes demand to become more inelastic.
E) some consumers,who are willing to pay the uniform monopoly price,are unwilling to pay more than the marginal cost.

Question

Quizplus · Accepted Answer

A monopolist has an incentive to price discriminate because some consumers, who are unwilling to pay the uniform monopoly price, may still be willing to pay more than the marginal cost. By charging different prices to different customers, the monopolist is able to extract more surplus from those who are willing to pay a higher price, while still selling to those who are only willing to pay a lower price. This allows the monopolist to increase profits compared to a situation where they only offer a single price to all customers.

The Reason a Monopolist Has an Incentive to Price Discriminate