To maximize profit a price discriminating firm should
A) produce the output at which total marginal revenue equals marginal cost.
B) allocate the optimal output so the elasticity is the same in each market.
C) allocate the output so that marginal revenue is the same in each market.
D) both a and c
E) all of the above

Question

Quizplus · Accepted Answer

To maximize profit, a price discriminating firm should produce at the output where total marginal revenue equals marginal cost (option A). This will ensure that the firm is producing efficiently and maximizing its profits.

In addition, the firm should also allocate the output so that marginal revenue is the same in each market (option C). This will ensure that the firm is capturing the maximum possible revenue from each market segment.

Therefore, the best choice is both option A and C, which is option D.

To Maximize Profit a Price Discriminating Firm Should