For a perfectly price-discriminating monopolist (ppdm), profit can be calculated as:

Question

Quizplus · Accepted Answer

For a ppdm, the profit-maximizing output is the point on the demand curve where marginal revenue (MR) equals marginal cost (MC). Since a ppdm charges each customer the maximum amount they are willing to pay, the demand curve in this case is also the marginal revenue curve. The profit can be calculated as (P-AC)xQ, where P is the price, AC is the average cost, and Q is the quantity sold.

In choice B, the MR curve is given by 11eb11da_1d21_81f0_ad38_b373400b75ab_TB3883_11 and the MC curve is given by 11eb11da_1d21_81f1_ad38_1d5a15bd7136_TB3883_11. The profit-maximizing output is where MR=MC, which is Q=2. At Q=2, the price is given by the demand curve 11eb11da_1d21_81f2_ad38_fd36cf626c1a_TB3883_11. Plugging in Q=2 and the corresponding price into the profit equation, we get a profit of 11eb11da_1d21_5adf_ad38_0f0651a6d8d8_TB3883_11.

Therefore, the correct choice is B.

For a Perfectly Price-Discriminating Monopolist (Ppdm), Profit Can Be Calculated