When a monopolist is able to price-discriminate:
A) its profits tend to increase and consumer surplus tends to fall.
B) both its profits and consumer surplus tend to increase.
C) both its profits and consumer surplus tend to decrease.
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 charges different prices to different groups of consumers based on their willingness to pay. This results in an increase in profits for the monopolist as they are able to capture a larger portion of the consumer surplus. However, consumers who are charged the higher price will experience a decrease in consumer surplus. Therefore, while profits tend to increase, consumer surplus tends to fall.

When a Monopolist Is Able to Price-Discriminate