Price discrimination is a rational strategy for a profit-maximizing monopolist when
A)the monopolist finds itself able to produce only limited quantities of output.
B)consumers are unable to be segmented into identifiable markets.
C)the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior.
D)there is no opportunity for arbitrage across market segments.

Question

Quizplus · Accepted Answer

Price discrimination is more effective for a monopolist when they can segment markets in such a way that prevents arbitrage, meaning consumers cannot buy a product at a lower price in one market and sell it in another. This allows the monopolist to charge different prices to different groups of consumers based on their willingness to pay, maximizing profits without losing revenue to reselling.

Price Discrimination Is a Rational Strategy for a Profit-Maximizing Monopolist