Status: QUESTION 3 Tobac Co. a constant marginal cost of $2.00 per pack. If Toba
ID: 1113391 • Letter: S
Question
Status: QUESTION 3 Tobac Co. a constant marginal cost of $2.00 per pack. If Tobac Co. could successfully carry out pertect price discrimination, the social where the U.S. dollar is used as the official currency. The frm faces the demand curve shown below. The firm has and the consumer surplus would be Price (S per pack 10 2 MC 50 100 150 200 Quantity mlions of packs) not be maximized. $112.5 million Obe maximized; $450 million not be maximized; S0 be maximized, S0 Click Save and Submit to save and submit. Click save All Answers to save all answers.Explanation / Answer
Question 3
When a monopolist successfully implement perfect price discrimination then in that case he is able to capture the entire consumer surplus. So, consumer surplus becomes zero.
Secondly, in case of perfect price discrimination, quantity produced by monopolist corresponds to the intersection point of MC curve and demand curve.
Such quantity is socially optimal quantity and therefore at this quantity social surplus is maximized.
So,
The social surplus would be maximized and the consumer surplus would be $0.
Hence, the correct answer is the option (4).