3.Discriminating monopolists are able to charge different prices to different customers.

In
fact, a perfectly discriminating monopolist is able to charge each customer he his
exact(personal) reservation price for the item the monopolist sells. Explain why this would be
beneficial for the monopolist in terms of his revenue and profit.

Discriminating Monopolist

It is a single business enterprise that charges different prices to distinct consumer groups for
the same goods and services. It involves maximum consumer exploitation, depriving them of
the right to enjoy consumer surplus. The aim of the monopolists is to maximise total profits
and revenue since they charge different prices in separate markets.

Answer to the question

In perfect price discrimination, the monopolist charges a favourable price each consumer is
able to pay. As a result, the marginal revenue is above the aggregate demand. In this way, the
firm charges the maximum price for each unit, enabling it to attract all consumer surplus
available for itself. All this consumer surplus is converted to producer surplus. Small firms
find themselves surviving if they are in a position to charge distinct prices in times of lower
any greater demand. Firms increase profits when they charge different prices to distinct
consumers. This is because customers are enticed to buy large quantities of goods or even
motivate uninterested consumers to purchase goods. This will attract increased revenues and
profits to the company.