A firm operates as a monopolist in a small tourist town. It rents apartments, similar in structure, to tourists. In previous years, the company reduced the rental price in order to rent out additional apartments. The reduction in price reduced the firm's profits. In the current year, the company uses perfect price discrimination to charge for each incremental apartment. Which of the following is true due to the firm's price discrimination? The consumer surplus increases, and the firm's surplus decreases.
The average price decreases, which reduces the total revenue from the first units sold.
The company's total economic profits decrease as the new price charged impacts all units sold.
Allocation of resources becomes even more inefficient, creating a greater deadweight loss.
The demand is equal to marginal revenue, which equals marginal cost for the last unit sold.