Problem 6 Hard Difficulty

When a monopolist switches from charging a single
price to practicing perfect price discrimination, it
reduces
a. the quantity produced.
b. the firm's profit.
c. consumer surplus.
d. total surplus.

Answer

C. consumer surplus.

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Principles of Microeconomics

Chapter 15

Monopoly

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Video Transcript

hi, everyone. So there's a problem prop problem. Six. Some chapter 15. So on this question is asking about what's while What's which perimeter will be reducing when a monopolist switches from charging a single press to participate in perfect price discrimination and the before way attempting way. Attempting to on to talking about this question. I want to just really freeze. What is press discrimination? The disk wacked the price discrimination by definition, is the business predators off sounding the same good at the different suppresses two different kung customers. What does this mean? That's before practicing perfect Christ discrimination, the monopolies that just charged a single press. So all counts customers, right? No matter of the customers waiting this toe pay this product. But after conducting perfect press discrimination, the monopolies before contacting this perfect press discrimination the monopolist must on No, the winning is off the consumer. Winning this off, paging this product for like, for each single customer you ordered to, uh, so to have their so called perfect press discrimination. And, uh, also, the best way to understand this sort of forecasters is to visualize it. So I took, like, figure night from chapter 15 on Thio kind off illustrates what I was just talking about, right? So that's the That's the left hand side. We can see this. A graph. It's about Monopoly with single price. So this is a single price, and there's a quantity soda when we know the prophet the consumer part surpassed and also that that we lost. But after price after conducting price, perfect price discrimination, we know does this whole triangle as we can see the whole triangle, which was which was split into three parts at left hand side and ran out. It's just a single region, which, with the profit for the monopolies, why conveys hype in because of the monopoly is charged different. We know that the man is the reference referenced the conch, the each constant consumers. Winning is to pay something to pay this product. The consumer able to know the winning this for each single consumer. So the moment has come kind off. I had this whole region and this is a quantity, so we know the quantity. So lecture before the county soda at this point. And so the quantity the quantity sold raises right and also and we also know that from from here from here. And we know the total press now. Yuko, stop, uh, firm's profits. Comparing this to finals, you can see that's a perfect press. Discrimination raises profit, obviously, because the property this whole region definitely squeakers end the region before right and also raises total surpassed. Because there's no that we lost involved after conducting perfect price discrimination. But the consumer surpassed lowers, obviously, because the Manama is able to charge on the highest press for each single consumer. Right? So what's will be reduced? It's obvious, right? The consumers surplus will be reduced, so sea will be our ever answer on. Thank you.

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