- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 9. The Firm and Market Structures
- Subject 6. Price Discrimination
CFA Practice Question
With perfect price discrimination, the market demand curve becomes the ______.
B. marginal revenue curve
C. marginal cost curve
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 |