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Which of the following most likely describes the price and output produced under perfect competition relative...

Which of the following most likely describes the price and output produced under perfect competition relative to perfect price discrimnation by a monopoly? 1. Price lower, output same   2. Price lower, output higher 3. price same, output same

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Answer #1

Option 3 is correct

The price is always equal to marginal cost in competition as well as in perfect price discrimination by monopolist. Because of this reason the quantity produced is also same under both cases. This happens because in perfect competition, the demand curve for each seller is flat and therefore price is fixed. The seller has to just equate price and marginal cost to get the quantity sold. For perfect price discrimination the seller charges each consumer his reservation price which means for one particular consumer the price is also equal to the marginal cost. This also indicates that the quantity is also the same

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