Final answer:
True, profit maximization with price discrimination involves applying marginal analysis for each buyer group, enabling the monopolist to maximize profits by ensuring marginal revenue exceeds marginal cost for each group.
Step-by-step explanation:
The statement is true. Profit maximization with price discrimination does involve firms applying marginal analysis separately for each distinct group of buyers. In price discrimination, a monopolist can charge different prices to different groups of consumers for the same good. By doing so, the firm maximizes its profit by ensuring that the marginal revenue from each group exceeds the marginal cost of producing the extra unit.
In perfect price discrimination, the monopolist is able to capture all consumer surplus by charging each buyer their maximum willingness to pay, thus translating into the monopolist earning the maximum possible profits. Unlike a perfectly competitive market where firms maximize profits when price equals marginal cost (P = MC), leading to allocative efficiency, a discriminating monopolist aims to maximize profits without necessarily achieving allocative efficiency.