Refer to the following table to answer the following questions:

-Kaleb is the only provider of bottled water for three cities.Because he has access to a natural spring,the marginal cost to produce an additional bottle is $0.Imagine he could price discriminate perfectly in this market.How much more profit would his firm earn if he practiced perfect price discrimination instead of practicing imperfect price discrimination (charging different prices in each city)?
A) $55
B) $30
C) $25
D) $20
E) $10

Question

Refer to the following table to answer the following questions:
 
-Kaleb is the only provider of bottled water for three cities.Because he has access to a natural spring,the marginal cost to produce an additional bottle is $0.Imagine he could price discriminate perfectly in this market.How much more profit would his firm earn if he practiced perfect price discrimination instead of practicing imperfect price discrimination (charging different prices in each city)?
A) $55 
B) $30 
C) $25 
D) $20 
E) $10

Quizplus · Accepted Answer

The profit-maximizing monopolist will set marginal cost equal to marginal revenue in each market. Since marginal cost is zero, the monopolist will set price equal to marginal revenue in each market. The difference between the price and marginal cost is the profit per unit. The total profit is the sum of the profit per unit in each market.Under perfect price discrimination, the monopolist will charge each consumer their maximum willingness to pay. This means that the monopolist will extract all of the consumer surplus. Under imperfect price discrimination, the monopolist will charge different prices in different markets, but they will not be able to extract all of the consumer surplus.The difference in profit between perfect price discrimination and imperfect price discrimination is the amount of consumer surplus that the monopolist is able to extract. In this case, the difference in profit is $55.

Refer to the Following Table to Answer the Following Questions