Compared to the monopoly outcome with a single price, imperfect price discrimination (i)
Sometimes raises total surplus.
(ii)
Sometimes lowers total surplus.
(iii)
Always leads to a lower quantity of output.
A)(i) and (ii) only
B)(ii) and (iii) only
C)(i) and (iii) only
D)(i), (ii), and (iii)

Question

Quizplus · Accepted Answer

When a monopolist engages in imperfect price discrimination, they are able to charge different prices to different consumers based on their willingness to pay. This can result in a higher total surplus if the consumers who face a lower price and thus buy more of the product have a higher marginal utility than those who face a higher price and buy less. However, imperfect price discrimination can also lead to a lower total surplus if it results in some consumers being priced out of the market entirely. Additionally, imperfect price discrimination can lead to a lower quantity of output as the monopolist may choose to sell less to those who are willing to pay a lower price. Thus, options (i) and (ii) are both possible outcomes of imperfect price discrimination. Option (iii), however, is not always true as the monopolist may choose to produce more in order to sell to those consumers who are willing to pay a lower price.

Compared to the Monopoly Outcome with a Single Price, Imperfect