Concept explainers
First degree
Explanation of Solution
Since the marginal revenue equals the price in the case of the first degree price discrimination, the demand curve of the firm will be the same as the marginal revenue curve of the firm. Thus, the MR = MC will give the profit-maximizing output of the firm in the market. This is obtained at the point where the MC curve intersects the demand curve of the firm. Therefore, the MC will be equal to the price of the last unit sold in the market.
Price discrimination: The price discrimination is the practice of charging different prices for the exact same commodity from different consumers or for different quantities of the product consumed in the market.
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