Suppose a Monopoly's Inverse Demand Curve Is P = 100

question 91

Multiple Choice

Suppose a monopoly's inverse demand curve is P = 100 -Q,it produces a product with a constant marginal cost of 20,and it has no fixed costs.How much more or less is the deadweight loss if the monopoly can practice perfect price discrimination compared to it practicing uniform pricing?

• A) The deadweight loss is smaller by 800.
• B) The deadweight loss is greater by 800.
• C) The deadweight loss is smaller by 1600.
• D) The deadweight loss is greater by 1600.

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Definitions:

Bounded Rationality Model

A concept suggesting that individuals make decisions based on the limited information available to them and within the constraints of their mental capacity.

Basic Models

Fundamental frameworks or approaches used to simplify and understand complex phenomena.

Organizational Decision Making

The process by which choices are made within an organization, involving the selection of alternatives based on the assessment of objectives and options.

Satisficing

A decision-making strategy that entails searching through the available alternatives until an acceptability threshold is met, rather than seeking the best possible solution.