An ordinary price discrimination monopolist that serves two markets and can produce any level of output that it desires will maximize profits by:
A)producing at the minimum of each market's AC function.
B)producing output where the horizontal sum of the MR curve meets AC.
C)producing where MR = MC in each market.
D)charging a price equal to MR in each market.

Question

Quizplus · Accepted Answer

An ordinary price discrimination monopolist that serves two markets will maximize profits where MR = MC in each market. This is because in each market the firm is still a monopoly and can set its own price, but it will produce where marginal revenue equals marginal cost in order to maximize profits. Producing at the minimum of each market's AC function or producing output where the horizontal sum of the MR curve meets AC may not necessarily lead to profit maximization. Charging a price equal to MR in each market may not lead to profit maximization either, as it may not cover the firm's costs.

An Ordinary Price Discrimination Monopolist That Serves Two Markets and Can