What is the result when a monopolist is able to price-discriminate?
A) Its profits tend to fall and its output tends to increase.
B) Both its profits and output tend to increase.
C) Its profits tend to increase and its output tends to fall.
D) Both its profits and output tend to decrease.

Question

Quizplus · Accepted Answer

When a monopolist is able to price-discriminate, it can charge different prices to different groups of customers based on their willingness to pay. This leads to an increase in profits as the monopolist can capture more of the consumer surplus. Additionally, output tends to increase as the monopolist is able to sell to a larger market, including those who would not have purchased at the higher, single price. Therefore, both profits and output tend to increase.

What Is the Result When a Monopolist Is Able to Price-Discriminate