Consider Three Pricing Strategies That the Firm Can Pursue

question 10

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 most beneficial to society as a whole?

• A) Both perfect price discrimination and a two-part tariff pricing are equally beneficial in that the marginal benefit of the last unit sold equals the marginal cost of producing that unit.
• B) only perfect price discrimination because this pricing method eliminates deadweight loss
• C) single-price monopoly pricing because consumers enjoy at least some consumer surplus
• D) only two-part tariff pricing because the per-unit portion of the price is set equal to marginal cost

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes and interest, have been deducted from total revenue.

Distributions

Payments made from a company or a fund to its shareholders, often from profits or reserves.

Risk

The exposure to the chance of loss or adverse outcomes in decision-making and financial investments, varying in likelihood and potential impact.

Uncertainty

The lack of certainty or predictability in the outcome of an event, often affecting decision-making and financial projections.