If the monopolist shown in the following figure could practice first-degree price discrimination,the producer surplus would be:
A) $0.
B) $225.
C) $450.
D) $900.
E) $1,200.

Question

If the monopolist shown in the following figure could practice first-degree price discrimination,the producer surplus would be: 
A) $0. 
B) $225. 
C) $450. 
D) $900. 
E) $1,200.

Quizplus · Accepted Answer

In first-degree price discrimination, the monopolist charges each customer their willingness to pay. This means they can capture the entire consumer surplus as producer surplus. In the graph, the marginal cost curve intersects the demand curve at a quantity of 6. At this quantity, the price charged to each customer would be their willingness to pay, which is shown by the vertical lines. The producer surplus would be the sum of the rectangles formed between the marginal cost curve and each willingness to pay line. Adding these up, the producer surplus would be (12-6)*$150 + (14-12)*$100 + (16-14)*$50 = $900.

If the Monopolist Shown in the Following Figure Could Practice