Consider Three Pricing Strategies That the Firm Can Pursue

question 196

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:

Free Trade Areas

Regions in which a group of countries have agreed to reduce or eliminate trade barriers among themselves.

Exporting Nation

A country that sends goods or services to another country for sale.

Trade Deficit

Occurs when a country's imports exceed its exports during a specific time period, leading to a negative balance of trade.

Trade Deficit

A state where the amount of goods and services brought into a country is higher than the amount sent out, leading to an adverse balance of trade.