A monopoly will not be able to perfectly price discriminate ifGroup of answer choicesobtaining information about each buyer's reservation price is too costly.demand is very elastic.demand is very inelastic.resale is impossible.
Question
A monopoly will not be able to perfectly price discriminate ifGroup of answer choicesobtaining information about each buyer's reservation price is too costly.demand is very elastic.demand is very inelastic.resale is impossible.
Solution 1
A monopoly will not be able to perfectly price discriminate if obtaining information about each buyer's reservation price is too costly.
Here's why:
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Perfect price discrimination requires the monopolist to know exactly how much each consumer is willing to pay for each unit of the good. This is known as the consumer's reservation price.
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If obtaining this information is too costly, the monopolist will not be able to set the price equal to each consumer's reservation price.
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This is because the cost of obtaining the information would outweigh the additional revenue the monopolist could earn from perfect price discrimination.
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Therefore, if obtaining information about each buyer's reservation price is too costly, the monopolist will not be able to perfectly price discriminate.
The elasticity of demand and the possibility of resale do not directly affect a monopolist's ability to perfectly price discriminate.
Solution 2
A monopoly will not be able to perfectly price discriminate if obtaining information about each buyer's reservation price is too costly.
Here's why:
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Perfect price discrimination requires that a monopolist knows exactly what the maximum price (or reservation price) each consumer is willing to pay for each unit of output.
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If obtaining this information is too costly, the monopolist will not be able to perfectly price discriminate because it won't know exactly how much each consumer is willing to pay.
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Without this information, the monopolist may end up setting a price that is either too high (causing the consumer to not purchase the product) or too low (resulting in the monopolist not maximizing its potential profit).
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Therefore, the cost of obtaining information about each buyer's reservation price is a crucial factor in a monopolist's ability to perfectly price discriminate.
The elasticity of demand and the possibility of resale do not directly affect a monopoly's ability to perfectly price discriminate.
Similar Questions
For a firm to price discriminate,Group of answer choicesit must have some market power.it must be regulated by the government.it must be a natural monopoly.consumers must tell the firm what they are willing to pay for the product.
Price discriminationGroup of answer choicescan occur in both perfectly competitive and monopoly markets.is illogical because it does not maximize profits.can maximize profits if the seller can prevent the resale of goods between customers.is illegal in the United States and Europe.
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A third-degree price-discriminating pure monopoly will follow a system whereMultiple Choicebuyers with relatively more inelastic demands are charged higher prices than buyers with relatively more elastic demands.all buyers are charged the same price regardless of their elasticity of demand.the price of the product is held the same even if the demand changes.buyers with relatively more inelastic demands are charged lower prices than buyers with relatively more elastic demands.
A monopoly will engage in price discrimination, if it can, in order to increase profits by doing which of the following?Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aBy selling more of its goodsbBy reducing costs for some of its productscBy continuing to produce the same amountdBy increasing prices for all consumers and producing less
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