CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

With perfect price discrimination, the market demand curve becomes the ______.

A. average revenue curve
B. marginal revenue curve
C. marginal cost curve
Correct Answer: B

User Contributed Comments 7

User Comment
surob Can someone explain why? I got it right, but don't understand the reasoning behind it.
bahodir surob, as you might know, perfect price discrimination means there is no consumer surplus. Consequently, all points in the demand curve will be same with MR curve.
vikram59 the whole reason that the MR curve lies below the demand curve is that the monoploy loses the extar revenue from the initial units when it lowers the price. With price discrimnation, that changes.
bundy because it moves toward perfect competition
choas69 Marginal revenue curve is always lower than the demand curve, however with price discrimination it converts the consumer surplus into economic profit and moves the marginal revenue curve closer to the demand curve by closing all dead weight loss.
khalifa92 well said.
Huricane74 Here is a video with graphs that explains perfect price discrimination.
Micro 4.8 Price Discriminating Monopoly (First Degree)
https://www.youtube.com/watch?v=s3wFJHIuJPs
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