Use the following to answer question:
-(Table: Prices and Demand) Look at the table Prices and Demand. Professor Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is $18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he produce?
A) 3
B) 4
C) 5
D) 6

Question

Use the following to answer question: 
-(Table: Prices and Demand) Look at the table Prices and Demand. Professor Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is $18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he produce?
A) 3 
B) 4 
C) 5 
D) 6

Quizplus · Accepted Answer

In perfect price discrimination, the monopolist produces where price equals marginal cost. If the marginal cost is $18, Dumbledore will produce until the price of the last hat sold is $18. Assuming the table shows decreasing prices with increasing quantity, he will produce 6 hats if the price for the 6th hat is $18.

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