An internationally discriminating monopolist will maximize its profits if it sets quantity where:

Question

Quizplus · Accepted Answer

In order to maximize profits, the monopolist needs to produce at the point where its marginal revenue equals its marginal cost. In the case of an internationally discriminating monopolist, it must also take into account the different prices it can charge in the domestic and foreign markets. Therefore, the optimal quantity is where MC = home MR = foreign MR. This ensures that the monopolist is producing at the point where it has the same marginal revenue in both markets, and is charging the highest possible price in each market while still selling at that quantity. Option A is not correct because setting MC = home P and MC = foreign MR would not take into account the different prices it can charge in each market. Option B is not correct because it assumes that the monopolist has different marginal revenues in each market, when in fact it is assumed that MR is the same in both markets. Option C is not correct because it assumes that the monopolist can charge the same price in both markets, which is not the case for an internationally discriminating monopolist.

An Internationally Discriminating Monopolist Will Maximize Its Profits If It