Exhibit 9.7

-Refer to Exhibit 9.7,which shows the cost and revenue curves faced by a profit-maximizing monopolist.If the monopolist engages in perfect price discrimination,its profit-maximizing output will be _____

Question

Exhibit 9.7

-Refer to Exhibit 9.7,which shows the cost and revenue curves faced by a profit-maximizing monopolist.If the monopolist engages in perfect price discrimination,its profit-maximizing output will be _____

Quizplus · Accepted Answer

Perfect price discrimination occurs when the monopolist charges each customer his or her reservation price (the highest price each customer is willing to pay) and captures all of the consumer surplus. In this case, the monopolist would produce enough to sell to all customers willing to pay the highest price (shown by the marginal revenue curve). This occurs at an output of 884 units, where the marginal cost curve intersects the highest reservation price of $10. Therefore, the monopolist's profit-maximizing output is 884 units.

Exhibit 9.7 -Refer to Exhibit 9.7,which Shows the Cost and Revenue Curves