A price-discriminating monopoly
A) sells a larger quantity than it would if it were a single-price monopoly.
B) is illegal.
C) cannot control the price of its product.
D) makes a smaller economic profit than it would if it were a single-price monopoly.
E) cannot offer discounts.

Question

Quizplus · Accepted Answer

A price-discriminating monopoly sells different quantities at different prices, charging higher prices to customers with a more inelastic demand and lower prices to customers with a more elastic demand. By doing so, it can capture more consumer surplus and thus sell a larger quantity than if it charged a single price. Therefore, A is the correct choice. B is incorrect because price discrimination is not necessarily illegal. C is incorrect because a monopoly, whether price-discriminating or not, has the power to control the price of its product. D is incorrect because a price-discriminating monopoly can actually make a larger economic profit than a single-price monopoly by charging different prices to different customers based on their willingness to pay. E is incorrect because offering discounts is one of the ways a price-discriminating monopoly can segment its market and capture more consumer surplus.

A Price-Discriminating Monopoly