Asked by Diana Muñoz on Jul 16, 2024
Verified
If a monopoly can engage in perfect price discrimination,then its marginal revenue is equal to price,in contrast to the usual situation for a monopoly,in which price is higher than is marginal revenue.
Perfect Price Discrimination
Perfect price discrimination occurs when a seller charges each buyer their maximum willingness to pay, capturing the entire consumer surplus as profit.
Marginal Revenue
The enhanced income from disposing of one more unit of a product or service.
- Detail the concept of perfect price discrimination and its implications for economic efficiency and the surplus attributable to consumers.
Verified Answer
NR
Nafia RashidJul 18, 2024
Final Answer :
True
Explanation :
With perfect price discrimination, the monopoly can charge each customer based on their willingness to pay, resulting in a marginal revenue equal to the price charged. In contrast, in a typical monopoly situation, the price is set higher than marginal revenue in order to maximize profits.
Learning Objectives
- Detail the concept of perfect price discrimination and its implications for economic efficiency and the surplus attributable to consumers.
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