Final answer:
A price-discriminating monopolist charges higher prices to those with greater willingness-to-pay, maximizing profits as long as prices exceed average total costs, and thereby capturing consumer surplus.
Step-by-step explanation:
A price-discriminating monopolist will set prices so that customers with a higher willingness-to-pay, pay higher prices than other customers, as long as this price is higher than the monopolist's average total cost. This scenario is referred to as perfect price discrimination.
With perfect price discrimination, the monopolist is able to capture the entire consumer surplus by charging each consumer the maximum that they are willing to pay, resulting in no consumer surplus and maximum possible profits for the monopolist.
The monopolist will determine the profit-maximizing output level where marginal revenue (MR) equals marginal cost (MC), and then charge the price that corresponds to this quantity on the market demand curve. If the price is above the average cost, the monopolist reaps positive profits, capturing the consumer surplus as profit.