Consider a monopolist that is able to distinguish between two distinct market segments,A and B,for its product.Marginal cost is constant at $18 for each unit produced.The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $25 and marginal revenue in segment B is $15.How can this firm maximize its profit?

Question

Quizplus · Accepted Answer

By increasing output in segment A and decreasing output in segment B, the monopolist can increase its total revenue and profit. This is because marginal revenue is higher in segment A than in segment B, so the firm can earn more revenue by selling more units in segment A and fewer units in segment B.

Consider a Monopolist That Is Able to Distinguish Between Two