Consider a Monopolist That Is Able to Distinguish Between Two

question 104

Multiple Choice

Consider a monopolist that is able to distinguish between two distinct market segments, A and B, for its product. Marginal cost is constant at $100 for each unit produced. The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $85 and marginal revenue in segment B is $105. How can this firm maximize its profit?

• A) increase the output in segments A and B
• B) maintain the current output and its allocation across segments
• C) decrease the output in segment A and increase the output in segment B
• D) increase the output in segment A and decrease the output in segment B
• E) decrease the output in segments A and B

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Definitions:

Pleurisy

An inflammation of the pleura, the membrane that lines the chest cavity and surrounds the lungs, causing sharp chest pain with breathing.

Residual Volume

The amount of air remaining in the lungs after a forceful exhalation, ensuring that gas exchange continues even between breaths.

Functional Residual Capacity

The volume of air remaining in the lungs after a normal, passive exhalation.

Total Lung Capacity

The maximum amount of air the lungs can hold, which is the sum of the vital capacity and the residual volume.