Compared to charging a single price, a monopolist's profits with price discrimination will be:

• A. the same, because total revenue does not change
• B. higher, because the monopolist can capture more consumer surplus
• C. zero, because price discrimination eliminates all profits
• D. lower, because price discrimination increases costs

Answer: (B)

Verified step by step guidance

1. Understand the concept of price discrimination: it occurs when a monopolist charges different prices to different consumers or groups based on their willingness to pay, rather than a single uniform price.
2. Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Under single pricing, some consumer surplus remains because the monopolist sets one price for all.
3. With price discrimination, the monopolist can capture more of this consumer surplus by charging higher prices to consumers with a higher willingness to pay and lower prices to others, thus increasing total revenue.
4. Since costs do not necessarily increase due to price discrimination, the increase in revenue translates into higher profits for the monopolist compared to charging a single price.
5. Therefore, the monopolist's profits with price discrimination will be higher because it allows the monopolist to capture more consumer surplus, increasing total profits.