Question

The monopolist has fixed costs of $1,000 and has a constant marginal cost of $4 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell? A monopolist faces the following demand curve Price Quantity $8 300 $7 400 $6 500 $5 600 $4 700 $3 800 $2 900 $1 1,000

Answer 1

In perfect price discrimination, the monopolist will sell up to the quantity where the marginal cost ($4) equals the consumer's willingness to pay, which is for 700 units according to the demand curve.

Step-by-step explanation:

The question pertains to a monopoly engaging in perfect price discrimination. To determine how many units a monopolist would sell if able to perfect price discriminate, we must understand that the monopolist will produce up to the quantity where the marginal cost equals the price consumers are willing to pay for each additional unit. In this case, since the marginal cost is constant at $4, the monopolist will continue to sell units as long as the price on the demand curve is above $4. The demand curve shows that consumers are willing to pay at least $4 for up to 700 units. Therefore, in perfect price discrimination, the monopolist will sell 700 units.