Suppose we compare two monopolists with identical cost and demand conditions. Monopolist A charges a single price. Monopolist B engages in price discrimination, charging a different price for different units of the product. Which one of the following statements is correct?
A) B will generally produce more than A, resulting in less deadweight loss.
B) A will produce less than B, resulting in smaller deadweight loss.
C) A and B will both produce the same amount.
D) A will produce more than B, resulting in larger deadweight loss.
E) B will produce less than A, resulting in a larger deadweight loss.

Question

Quizplus · Accepted Answer

Price discrimination allows Monopolist B to charge a higher price to consumers with a higher willingness to pay, resulting in a higher total revenue and output compared to Monopolist A who charges a single price.

Suppose We Compare Two Monopolists with Identical Cost and Demand