If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

A. the monopoly's profits are larger than under perfect price discrimination.

B. the monopoly's profits are larger than under single-price monopoly.

C. consumer surplus is larger than under single-price monopoly.

D. social welfare is larger than under perfect competition.

Question

Brendan

Business

7 October, 06:00

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then

A. the monopoly's profits are larger than under perfect price discrimination.

B. the monopoly's profits are larger than under single-price monopoly.

C. consumer surplus is larger than under single-price monopoly.

D. social welfare is larger than under perfect competition.

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Answers (1)

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Quinton Rose · Answer 1

Answer: Option (B) is correct.

Explanation:

Correct option: The monopoly's profits are larger than under single-price monopoly.

Monopolist can earn higher profit when he charged different prices for different quantities of goods than the single-price monopoly.

Single price monopoly is a situation in which monopolist charged the same price from all the consumers.

When there is a situation in which different price is charged from different consumers then this situation is known as price discrimination.

Because of the price discrimination he would be able to make more profits and if he doesn't make enough profit then he simply charged the same price from all the consumers.