Price discrimination is a rational strategy for a profit-maximizing monopolist when:

• A. the monopolist faces a perfectly elastic demand curve
• B. there are many firms in the market and products are identical
• C. all consumers have identical demand curves
• D. the monopolist can prevent resale and identify customers with different willingness to pay

Answer: (D)

Verified step by step guidance

1. Understand the concept of price discrimination: it occurs when a monopolist charges different prices to different consumers for the same product, based on their willingness to pay.
2. Recognize that for price discrimination to be profitable, the monopolist must be able to segment the market into groups with different demand elasticities or willingness to pay.
3. Note that preventing resale is crucial because if consumers who buy at a lower price can resell to those who would pay a higher price, the price discrimination strategy fails.
4. Identify that the monopolist must be able to distinguish between different consumer groups (e.g., by observable characteristics or purchase behavior) to charge different prices effectively.
5. Conclude that price discrimination is rational and profitable only when the monopolist can prevent resale and identify customers with different willingness to pay, which allows capturing more consumer surplus as profit.