Suppose that a monopolist charges a uniform price of $10 based on profit maximization and has a constant marginal cost of $3.Beth is willing to pay $6 for the monopolist's output.Therefore,
A) the monopolist should lower his price to $6 for all consumers.
B) the monopolist should ignore Beth's want;he is already maximizing profit.
C) if resale of the output is impossible,the monopolist should lower his price to $6 just for Beth.
D) if resale of the output is possible,he should lower his price to $6 just for Beth.
E) the monopolist will not be better off if he lowers his price to $6 just for Beth.

Question

Quizplus · Accepted Answer

If resale of the output is impossible, the monopolist can charge different prices to different consumers based on their willingness to pay. In this case, since Beth is only willing to pay $6, the monopolist should lower the price just for her to maximize profit. If resale of the output is possible, the monopolist may be hesitant to lower the price just for Beth since she may buy up all the output and resell it at a higher price. However, if the monopolist can somehow prevent resale (for example, by using differentiated products or services), then lowering the price just for Beth would still be the best choice.

Suppose That a Monopolist Charges a Uniform Price of $10