If the firm facing the demand curve P = 10

Question

If the firm facing the demand curve P = 10 - Q still has zero marginal costs and is now a perfect price discriminator instead of a single price monopolist, what will profits be if fixed costs are 12?
A)10
B)12
C)13
D)38

Quizplus · Accepted Answer

Under perfect price discrimination, the firm charges each consumer their maximum willingness to pay. In this case, the demand curve is also the marginal revenue curve. 
Setting MR=MC (which is zero as the question states zero marginal costs), we get: 
10-Q = 0 
Q = 10 
So the firm is able to sell all 10 units in the market. 
The price charged to each consumer would be their maximum willingness to pay. 
At Q=1, P=$9 
At Q=2, P=$8 
... 
At Q=10, P=$1 
Total revenue = $9 + $8 + ... + $1 = $55 
Total cost = $12 
Profit = Revenue - Cost = $43.