If a monopolist engages in price discrimination, it will
A) realize a smaller profit.
B) charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.
C) produce a smaller output than when it did not discriminate.
D) charge a competitive price to all its customers.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different customers based on their willingness to pay. This allows the monopolist to capture more consumer surplus and increase overall profits. The monopolist will charge a higher price where individual demand is inelastic (less responsive to price changes) and a lower price where individual demand is elastic (more responsive to price changes). This allows them to extract more revenue from those who are willing to pay more and increase their overall profits. Therefore, option B is the correct choice.

If a Monopolist Engages in Price Discrimination, It Will