When a price-discriminating monopolist divides its customers into two market segments,the price in each segment is determined by finding the level of output where that market's _____
A)average revenue equals average total cost.
B)average revenue equals average variable cost.
C)marginal revenue equals average total cost.
D)marginal revenue equals marginal cost.
E)marginal cost equals average total cost.

Question

Quizplus · Accepted Answer

In order to maximize profits, a monopolist (even a price-discriminating one) will produce the level of output where marginal revenue equals marginal cost. This applies to each market segment individually, as the monopolist wants to set the price in each segment to maximize profits overall. Therefore, the correct answer is (D) marginal revenue equals marginal cost.

When a Price-Discriminating Monopolist Divides Its Customers into Two Market