Consider a Monopolist That Is Able to Distinguish Between Two

question 23

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 $18 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 $25 and marginal revenue in segment B is $15. How can this firm maximize its profit?

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

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Definitions:

Industry Regulation

The imposition of rules by a government, along with mechanisms for their enforcement, designed to modify behaviors within specific industries.

Reserve Requirement

A regulation set by central banks determining the minimum amount of reserves that must be held by a commercial bank.

Credit Availability

Credit availability refers to the ease with which individuals and businesses can obtain loans or credit from financial institutions, which can significantly affect economic activity by influencing spending and investment.

Funds Lendability

The suitability and capability of funds or capital to be lent to borrowers, often considered by financial institutions.