Firms with monopoly power will price discriminate when ever possible because
A)it makes the price of the last unit sold lower which makes customers happy
B)discrimination increases profits
C)discrimination reduces costs
D)it reduces the dead weight loss and is better for society

Question

Quizplus · Accepted Answer

Price discrimination allows firms with monopoly power to charge different prices for the same good or service, based on the willingness and ability of different consumers to pay. This allows the firm to capture more consumer surplus as additional profit, thereby increasing profits. Option A is not necessarily true, as not all customers will necessarily be happy with price discrimination (those who are charged a higher price may feel disadvantaged). Option C is incorrect, as price discrimination may actually increase costs (e.g. if the firm has to spend more on advertising to target different types of consumers). Option D is incorrect, as while price discrimination may reduce deadweight loss, it is not necessarily better for society as a whole (some consumers may be worse off).

Firms with Monopoly Power Will Price Discriminate When Ever Possible