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A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):

A. different prices to compensate for differences in the characteristics of the product.

B. the same price if per unit cost is constant for each unit of the product.

C. that price that equals the buyer's marginal cost.

D. the maximum price each would be willing to pay.

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Sonal Bahl
Sonal BahlLv10
28 Sep 2020

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Related questions


1.
When a monopoly charges a higher price, fewer of its goods aresold.
A) True
B) False
2.
A firm can price discriminate if it operates in a competitivemarket.
A) True
B) False
3.
Declining average total cost with increased production is one ofthe defining characteristics of a natural monopoly.
A) True
B) False
4.
In a natural monopoly,if the government requires marginal costpricing, it must pay the monopolist a subsidy.
A) True
B) False
5.
A discriminating monopolist will produce a larger output than anon-discriminating monopolist.
A) True
B) False
6.
By selling hardcover books to die-hard fans and paperback books toless enthusiastic readers, the publisher is able to pricediscriminate and raise its profit.
A) True
B) False
7.
For a monopoly, marginal revenue is often greater than the pricethey charge for their good.
A) True
B) False
8.
A monopoly that engages in perfect price discrimination produces asmuch as a firm in perfect competition
A) True
B) False
9.
The monopolist is a price maker
A) True
B) False
10.
A monopolist will always pick a price in the elastic region of thedemand curve
A) True
B) False

A monopolist sells travel services to two groups of people with the following demand curves Q1 = 100 - 2P1 (and MR1 = 50 - Q1) and Q2 = 60 -P2 (and MR2 = 60 -2Q2) . The marginal cost of providing one unit of travel service to either of the groups is the same for the monopolist, i.e., MC = $10 per unit.

(a) Identify whether group 1 or group 2 has more elastic demand.

(b) If the monopolist can price discriminate, then what prices would the monopolist charge the two groups for travel services? What quantities will the monopolist sell to each group?

(c) Suppose the monopolist is forced to charge a single price to all consumers regardless of which group they belong to. What is the profit maximizing price and quantity? Who benefits from this policy? Who loses?

(d) What would be equilibrium price and quantity if the market was competitive?

Select the correct answer:

A (legal; natural) monopoly exists when one firm can meet the entire market demand at a lower average total cost than two or more firms could.

A monopoly that is able to sell different units of a good or service for different prices is a (natural-price; price-discriminating) monopoly.

The act of obtaining special treatment by the government to create an economic profit is called (government surplus; rent seeking).

Regulated firms have an incentive to inflate their costs under (rate of return; price cap) regulation.

The U.S. Postal Service has a (natural; legal) monopoly on first class mail delivery.

A (single-price; price discriminating) monopoly maximizes profit by producing the quantity at which marginal revenue equals marginal cost and then charging the maximum price that consumers are willing to pay for that quantity.

The key idea behind price discrimination is to convert (consumer surplus; producer surplus) into economic profit.

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