{"id":184442,"date":"2025-01-21T05:08:08","date_gmt":"2025-01-21T05:08:08","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=184442"},"modified":"2025-01-21T05:08:10","modified_gmt":"2025-01-21T05:08:10","slug":"a-perfectly-price-discriminating-monopolist-charges-each-buyer","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/01\/21\/a-perfectly-price-discriminating-monopolist-charges-each-buyer\/","title":{"rendered":"A perfectly price discriminating monopolist charges each buyer"},"content":{"rendered":"\n<p>A perfectly price discriminating monopolist charges each buyer<\/p>\n\n\n\n<p>A. the perfectly competitive equilibrium price. ?<\/p>\n\n\n\n<p>B. more than his or her reservation price. ?<\/p>\n\n\n\n<p>C. exactly his or her marginal cost. ?<\/p>\n\n\n\n<p>D. exactly his or her reservation price<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Correct Answer: <strong>D. Exactly his or her reservation price<\/strong><\/h3>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>A perfectly price-discriminating monopolist charges each buyer their <strong>reservation price<\/strong>, which is the maximum price a buyer is willing to pay for a given quantity of a good or service. This strategy allows the monopolist to capture all the consumer surplus (the difference between what consumers are willing to pay and what they actually pay in a competitive market).<\/p>\n\n\n\n<p>Here\u2019s why <strong>D<\/strong> is the correct answer:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Definition of Perfect Price Discrimination<\/strong>: Perfect price discrimination, also known as first-degree price discrimination, occurs when a monopolist is able to charge each consumer their reservation price. This means no consumer surplus exists, as each consumer pays exactly what they value the product at.<\/li>\n\n\n\n<li><strong>Consumer Surplus and Producer Surplus<\/strong>: In this scenario, the monopolist captures all potential consumer surplus as producer surplus. Unlike in a perfectly competitive market, where consumers benefit from surplus due to uniform pricing, price discrimination ensures that the monopolist extracts the maximum willingness to pay from every consumer.<\/li>\n\n\n\n<li><strong>Efficiency<\/strong>: While perfect price discrimination eliminates consumer surplus, it leads to an efficient allocation of resources. The monopolist produces the same quantity of goods as in a perfectly competitive market because every unit that can be sold at a price greater than or equal to marginal cost is produced. This contrasts with traditional monopoly pricing, where the monopolist restricts output to maximize profits.<\/li>\n\n\n\n<li><strong>Why Other Options Are Incorrect<\/strong>:\n<ul class=\"wp-block-list\">\n<li><strong>A. Perfectly competitive equilibrium price<\/strong>: This would result in consumer surplus, which is not the case here.<\/li>\n\n\n\n<li><strong>B. More than reservation price<\/strong>: Buyers would not purchase at a price higher than their reservation price.<\/li>\n\n\n\n<li><strong>C. Exactly marginal cost<\/strong>: This only happens under perfect competition, not monopoly.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n\n\n\n<p>In conclusion, by charging each consumer their reservation price, a perfectly price-discriminating monopolist achieves maximum profit by capturing the entire area under the demand curve, leaving no consumer surplus.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A perfectly price discriminating monopolist charges each buyer A. the perfectly competitive equilibrium price. ? B. more than his or her reservation price. ? C. exactly his or her marginal cost. ? D. exactly his or her reservation price The Correct Answer and Explanation is : Correct Answer: D. Exactly his or her reservation price [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-184442","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/184442","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=184442"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/184442\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=184442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=184442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=184442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}