How can a monopoly price discriminate?
A discriminating monopoly is a monopoly firm that charges different prices to different segments of its customer base. Price discrimination is only achieved through the firm’s monopoly status to control pricing and production without competition.
How does a monopoly affect quantity?
The quantity sold by the monopolist is usually less than the quantity that would be sold in a perfectly competitive firm and the price charged by the monopolist is usually more than the price that would be charged by a perfectly competitive firm.
What is price discrimination under monopoly?
In monopoly, there is a single seller of a product called monopolist. The monopolist often charges different prices from different consumers for the same product. This practice of charging different prices for identical product is called price discrimination.
When a monopoly practices perfect price discrimination?
These levels are related to how well the monopolist can identify individual willingness to pay and segment the market accordingly. First degree or perfect price discrimination is when a firm charges each consumer their maximum willingness to pay, which is reflected by the demand curve.
What is the monopolist’s optimal price and output level?
One characteristic of a monopolist is that it is a profit maximizer. Since there is no competition in a monopolistic market, a monopolist can control the price and the quantity demanded. The level of output that maximizes a monopoly’s profit is calculated by equating its marginal cost to its marginal revenue.
How does a monopoly determine price and output?
A monopolist can determine its profit-maximizing price and quantity by analyzing the marginal revenue and marginal costs of producing an extra unit. If the marginal revenue exceeds the marginal cost, then the firm should produce the extra unit.
Which of the following is false in first degree price discrimination in a monopoly?
d. the marginal cost is equal to the corresponding price of each product. a. the marginal revenue from each product is equal to the marginal cost of producing each product.
Which of the following is not an example of price discrimination?
The correct answer is D. Charging the same price to everyone for a good or service is not price discrimination.
How does price discrimination work in simple monopoly?
Under simple monopoly, a single price is charged for the whole output; but under price discrimination the monopolist will charge different prices in different sub-markets. First of all, therefore, the monopolist has to divide his total market into various sub-markets on the basis of differences in price elasticity of demand in them.
How is price maximization determined in a monopoly?
Determining Price and Quantity Profit maximization for a monopoly charging a single price will occur where marginal revenue is equal to marginal cost. It is important to note that this gives the profit maximizing quantity but the price is determined by going up to the demand curve. That is]
Can a monopolist discriminate between different buyers?
It is more usual, however, to find that a monopolist sells identical products to different buyers at different prices. Discrimination between buyers is more usual than discrimination between units of a homogeneous commodity.
When does price discrimination occur in a commodity?
Discrimination between buyers is more usual than discrimination between units of a homogeneous commodity. In general, it can be said that price discrimination occurs when a producer sells a commodity to different buyers at two or more different prices for reasons not associated with differences in costs.
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