Suppose a monopolist faces the demand curve and cost curves shown below.
FIGURE 10-5
-Refer to Figure 10-5. If the monopolist is practicing perfect price discrimination and is maximizing its profits, the total revenue is represented by the area

Question

Suppose a monopolist faces the demand curve and cost curves shown below.
  FIGURE 10-5
-Refer to Figure 10-5. If the monopolist is practicing perfect price discrimination and is maximizing its profits, the total revenue is represented by the area

Quizplus · Accepted Answer

Under perfect price discrimination, the monopolist charges each customer their exact willingness to pay, resulting in the entire area under the demand curve being captured as total revenue. In this case, that is the area 0P5cQ2.

Suppose a Monopolist Faces the Demand Curve and Cost Curves