Suppose a producer initially charges each customer the same profit-maximizing price, with marginal revenue equal to _____ cost. If the producer now engages in price discrimination, the producer's profit will _____.
A)marginal; not change
B)marginal; rise
C)marginal, fall
D)average total; not change

Question

Quizplus · Accepted Answer

When engaging in price discrimination, the producer can charge different prices to different customers based on their willingness to pay. This allows the producer to capture more consumer surplus and increase their profits. In order to engage in price discrimination, the producer must have market power and be able to separate consumers into different groups with varying price elasticities of demand. As a result, the producer's marginal revenue will likely increase, leading to higher profits.

Suppose a Producer Initially Charges Each Customer the Same Profit-Maximizing