Refer to the information provided in Figure 13.11 below to answer the question(s) that follow. Figure 13.11
-Refer to Figure 13.11. Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. If the monopoly supplies 400 widgets, it will
A) break even.
B) maximize profits.
C) suffer an economic loss.
D) earn a profit, but less than it would earn if it produced 500 widgets.

Question

Refer to the information provided in Figure 13.11 below to answer the question(s) that follow.  Figure 13.11
-Refer to Figure 13.11. Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. If the monopoly supplies 400 widgets, it will
A) break even. 
B) maximize profits. 
C) suffer an economic loss. 
D) earn a profit, but less than it would earn if it produced 500 widgets.

Quizplus · Accepted Answer

When a monopolist is able to perfectly price discriminate, it charges each consumer the maximum they are willing to pay for each unit, effectively capturing the entire area under the demand curve up to the quantity produced as revenue. At 400 widgets, the monopolist can capture the entire consumer surplus as profit, up to that point, without any loss due to deadweight loss. Therefore, by supplying 400 widgets under perfect price discrimination, the monopolist maximizes profits because it can sell each unit at its corresponding demand price, ensuring that marginal revenue equals marginal cost for each unit sold.

Refer to the Information Provided in Figure 13