What is the result when a monopolist is able to price-discriminate?
A) Both its profits and consumer surplus tend to increase.
B) Both its profits and consumer surplus tend to decrease.
C) Its profits tend to increase and consumer surplus tends to fall.
D) Its profits tend to fall and consumer surplus tends to increase.

Question

Quizplus · Accepted Answer

When a monopolist is able to price discriminate, it can charge different prices to different groups of consumers. This leads to an increase in profits for the monopolist since it can now charge a higher price to consumers who are willing to pay more. However, consumer surplus tends to fall since some consumers will have to pay a higher price than before. Therefore, choice C is the correct answer.

What Is the Result When a Monopolist Is Able to Price-Discriminate