Suppose that the demand for a monopolist's product is estimated to be Q^d = 100 − 2P and its total costs are C(Q)= 10Q.Under first-degree price discrimination,the optimal price(s),number of total units exchanged,profit,and consumer surplus are: A) P = $30; Q = 40,  = $800; CS = $400. B) 10  P  100; Q = 80;  = $1,600; CS = $1,600. C) 10  P  50; Q = 80,  = $1,600; CS = $0. D) P = $30; Q = 40,  = $600; CS = $0.

Question

Quizplus · Accepted Answer

First-degree price discrimination means the monopolist charges each consumer the maximum they are willing to pay, eliminating consumer surplus and maximizing profit. The demand equation is Q = 100 - 2P, which can be rearranged to P = 50 - 0.5Q for price as a function of quantity. Total cost is C(Q) = 10Q. To maximize profit, the monopolist will produce where marginal revenue equals marginal cost, but under first-degree price discrimination, they capture the entire area under the demand curve up to the produced quantity as profit. The correct answer involves setting the price for each unit such that consumer surplus is zero, which aligns with option C, where the monopolist captures all possible profit, leaving no consumer surplus.

Suppose That the Demand for a Monopolist's Product Is Estimated