Micro Unit 4, Question 8: Price Discrimination + Funny Story

The video tutorial explains the concept of a non-price discriminating monopoly, highlighting how it determines quantity and price based on demand, marginal revenue, and marginal cost. It then transitions to a perfectly price discriminating monopoly, where each consumer is charged exactly what they are willing to pay, eliminating consumer surplus and deadweight loss. The tutorial covers the mechanics of price discrimination, multiple pricing strategies, and the impact on profit and consumer surplus.

In a non-price discriminating monopoly, where does the firm produce?

• Where marginal cost equals marginal revenue

• Where average total cost is minimized

• Where demand equals supply

• Where price equals marginal cost

What is the key change in a perfectly price discriminating monopoly compared to a non-price discriminating monopoly?

• The firm produces less quantity

• The average total cost curve shifts upwards

• The marginal revenue curve aligns with the demand curve

• The demand curve becomes horizontal

How does a perfectly price discriminating monopoly determine the price for each consumer?

• By charging a uniform price to all consumers

• By charging each consumer the average market price

• By charging each consumer the marginal cost

• By charging each consumer their maximum willingness to pay

What happens to consumer surplus in a perfectly price discriminating monopoly?

• It increases

• It remains the same

• It is completely eliminated

• It decreases slightly

Why is there no deadweight loss in a perfectly price discriminating monopoly?

• Because the monopoly produces the quantity that society actually wants

• Because the monopoly charges a uniform price

• Because the monopoly produces more than the socially optimal quantity

• Because the monopoly produces less than the socially optimal quantity