Use the figure below to answer the following questions. Figure 12.4.2
-Refer to Figure 12.4.2.Assume this monopoly practises perfect price discrimination.How many tickets are sold?
A)20 tickets
B)60 tickets
C)40 tickets
D)100 tickets
E)80 tickets

Question

Use the figure below to answer the following questions.  Figure 12.4.2
-Refer to Figure 12.4.2.Assume this monopoly practises perfect price discrimination.How many tickets are sold?
A)20 tickets 
B)60 tickets 
C)40 tickets 
D)100 tickets 
E)80 tickets

Quizplus · Accepted Answer

Perfect price discrimination means the monopolist charges each customer the maximum amount they are willing to pay for the particular quantity of tickets they desire. In this case, the demand for tickets is shown by the downward sloping curve. The monopolist charges each customer the maximum they are willing to pay, which is shown by the horizontal line at each individual's willingness to pay.

In this scenario, the maximum price a customer is willing to pay decreases with each additional ticket they purchase (due to the law of diminishing marginal utility). As a result, the monopolist will continue to sell tickets until the price equals the marginal cost (MC) of producing the last ticket sold.

In the graph, the marginal cost curve intersects the demand curve at a quantity of 60 tickets. This means that the monopolist will sell 60 tickets at a price equal to their marginal cost, maximizing their profits. Therefore, the best choice is B) 60 tickets.

Use the Figure Below to Answer the Following Questions