Suppose We Compare Two Monopolists with Identical Cost and Demand

question 37

Multiple Choice

Suppose we compare two monopolists with identical cost and demand conditions.Monopolist A charges a single price.Monopolist B engages in price discrimination,charging a different price for different units of the product.Which one of the following statements is correct?

• A)B will produce less than A,resulting in a larger deadweight loss.
• B)B will generally produce more than A,resulting in less deadweight loss.
• C)A will produce less than B,resulting in smaller deadweight loss.
• D)A will produce more than B,and there is no deadweight loss.
• E)A and B will both produce the same amount.

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Definitions:

Purely Competitive Seller

A market participant who has no control over the price of the product it sells because the market sets the price through supply and demand.

Total Cost

The sum of fixed and variable costs used in producing goods or services.

Product Price

The amount of money charged for a good or service, determined by various factors including production costs, market demand, and competition.

Marginal Cost

The elevation in aggregate expenditure associated with creating an additional unit of a product or service.