The figure below 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 _____.
Figure 9.6

A)700 units
B)810 units
C)884 units
D)976 units
E)1,000 units

Question

The figure below 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 _____.​ ​
Figure 9.6
​

A)700 units 
B)810 units 
C)884 units 
D)976 units 
E)1,000 units

Quizplus · Accepted Answer

Perfect price discrimination occurs when the monopolist is able to charge each customer their maximum willingness to pay. This means that the monopolist will produce where the demand curve intersects the marginal cost curve for each individual customer.

In this case, the demand curve intersects the marginal cost curve at 884 units, which is the profit-maximizing output level for a monopolist engaging in perfect price discrimination. Therefore, the answer is (C) 884 units.

The Figure Below Shows the Cost and Revenue Curves Faced