Consider Three Pricing Strategies That the Firm Can Pursue

question 207

Multiple Choice

Consider three pricing strategies that the firm can pursue:
A.optimal two-part tariff pricing
B.perfect price discrimination
C.single-price monopoly pricing.
Of these three strategies, which is least likely to benefit society as a whole?

• A)a two-part tariff pricing because consumers have to pay a fixed fee in addition to a per-unit price
• B)perfect price discrimination because those willing to pay higher prices are forced to subsidize those who are not
• C)Both perfect price discrimination and two-part tariff pricing do not benefit society because the entire consumer surplus is extracted by the producer.
• D)single-price monopoly pricing because there are mutually beneficial trades (between consumers and seller)that are not exploited

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Definitions:

Marginal Revenue Curve

A graph that shows the change in total revenue for each unit sold, illustrating how marginal revenue changes as output changes.

Multiplant Monopolist

A monopolistic firm that operates more than one production facility in different geographic locations to maximize profits and maybe meet differentiated demand.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period.

Marginal Revenue Curve

A graphical representation showing how marginal revenue changes as output level changes.