Given a fixed level of output, an ordinary price discriminating monopolist will:
A)charge different rates for different amounts of a good or service.
B)allocate output to equalize MR on the last unit sold in each market.
C)serve a high price elasticity market first.
D)always sell the quantity at which MR is equal to zero in each market.

Question

Quizplus · Accepted Answer

An ordinary price discriminating monopolist will allocate output to equalize MR on the last unit sold in each market in order to maximize profits. This means that the firm will sell more in the markets where demand is less elastic and charge a higher price for those units. In markets with more elastic demand, the firm will sell less and charge a lower price. This allows the monopolist to capture more consumer surplus and increase overall profits. Therefore, option B is the correct answer. Option A is incorrect because charging different rates for different amounts of a good or service is true of all price discriminating monopolists, not just ordinary ones. Option C is incorrect because there is no requirement for a price discriminating monopolist to serve a high price elasticity market first. Option D is incorrect because a monopolist will stop producing when MR is equal to MC in each market, not when MR is equal to zero.

Given a Fixed Level of Output, an Ordinary Price Discriminating