(Table: Prices and Demand for Ollivander's Magic Wands) Use Table: Prices and Demand for Ollivander's Magic Wands. Garrick Ollivander has a monopoly on magic wands in the wizarding world in Diagon Alley. The marginal cost of producing a wand is $18. Suppose Ollivander can perfectly price discriminate. How many wands will he produce?

A)3
B)4
C)5
D)6

Question

(Table: Prices and Demand for Ollivander's Magic Wands) Use Table: Prices and Demand for Ollivander's Magic Wands. Garrick Ollivander has a monopoly on magic wands in the wizarding world in Diagon Alley. The marginal cost of producing a wand is $18. Suppose Ollivander can perfectly price discriminate. How many wands will he produce?
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A)3 
B)4 
C)5 
D)6 ​

Quizplus · Accepted Answer

Under perfect price discrimination, Ollivander can charge each customer their maximum willingness-to-pay, which is different for each customer. Therefore, he will produce as many wands as there are customers willing to pay more than the marginal cost of $18, which is equal to the number of shaded cells in the "Quantity Demanded" column. In this case, there are six shaded cells, so Ollivander will produce 6 wands.