When a monopoly price discriminates,it
A) increases the amount of consumer surplus.
B) decreases its economic profit.
C) converts consumer surplus into economic profit.
D) converts economic profit into consumer surplus.
E) has no effect on the deadweight loss in the market.

Question

Quizplus · Accepted Answer

When a monopoly price discriminates, it charges different prices to different groups of consumers based on their willingness to pay. By doing this, the monopoly can convert some of the consumer surplus into economic profit. Price discrimination allows the monopoly to extract more consumer surplus and make additional profit, leading to an overall increase in economic profit. Therefore, C is the best choice as it correctly describes the effect of price discrimination on consumer surplus and economic profit.

When a Monopoly Price Discriminates,it