In order to maximize revenue from the sale of a fix quantity of output in two markets, a monopolist engaged in ordinary price discrimination would:
A)sell half the goods in each market.
B)make sure it sells all the units of the good.
C)allocate output so that MC is the same in both markets.
D)allocate output so that MR is the same in both markets.

Question

Quizplus · Accepted Answer

In order to maximize revenue, the monopolist must produce at the point where MR=MC. Since the monopolist is engaging in price discrimination, the prices charged in each market will be different, but the marginal revenue earned from each market will still be the same. Therefore, to maximize revenue, the monopolist should allocate output so that MR is the same in both markets. Selling half the goods in each market or making sure to sell all the units of the good does not necessarily lead to revenue maximization, and allocating output so that MC is the same in both markets is not relevant for revenue maximization in the context of price discrimination.

In Order to Maximize Revenue from the Sale of a Fix