With perfect price discrimination ________,and production is expanded until marginal revenue equals ________.
A) the firm's demand curve becomes its marginal revenue curve; marginal cost
B) the firm's demand curve becomes its marginal revenue curve; average total cost
C) the firm's marginal revenue curve bisects the angle with which demand intersects the price-axis; marginal cost
D) the firm's marginal revenue curve bisects the angle with which demand intersects the price-axis; average total cost
E) economic profit is maximized when the lowest price equals marginal cost; average total cost.

Question

Quizplus · Accepted Answer

Perfect price discrimination is a situation where the firm is able to charge each individual customer their willingness to pay for the product, and there is no consumer surplus. In this case, the firm's demand curve becomes its marginal revenue curve because it can sell any quantity at the price set for each customer. The firm will produce as long as the marginal revenue equals the marginal cost to maximize profits. Therefore, the correct choice is A, as it describes the situation where the demand curve becomes marginal revenue and the production is expanded until marginal revenue equals marginal cost.

With Perfect Price Discrimination ________,And Production Is Expanded Until Marginal