A perfect price-discriminating monopoly
A)has a demand curve that is also its marginal revenue curve.
B)maximizes total revenue.
C)is inefficient.
D)will produce the quantity at which the marginal cost curve intersects its demand curve.
E)both A & D are correct.

Question

Quizplus · Accepted Answer

A perfect price-discriminating monopoly charges each customer the maximum amount they are willing to pay, therefore there is no consumer surplus. This results in a demand curve that is also the marginal revenue curve, as each unit sold at a higher price only benefits the monopoly. This type of monopoly also produces at the quantity where marginal cost intersects the demand curve, leading to allocative efficiency. However, it is still considered inefficient due to the fact that it produces at a point where it cannot produce at the lowest possible cost (productive efficiency). Therefore, both A and D are correct.

A Perfect Price-Discriminating Monopoly