Question 1

Which of the following best defines price discrimination in the context of microeconomics?

Accepted Answer

The practice of selling different units of a good or service for different prices according to the consumers’ willingness to pay.

Question 2

How does price discrimination allow a monopoly to increase its economic profit?

Accepted Answer

By capturing consumer surplus.

Question 3

Suppose a movie theater charges $$10 for adults and 7 $$for children for the same movie ticket. This is an example of:

Accepted Answer

Third-degree price discrimination.

Question 4

A monopoly faces the following demand curve: $$Q = 100 - 2P. If $$the monopoly can perfectly price discriminate, what is the total revenue when selling 60 units?

Accepted Answer

$$TR = \sum_{q=1}^{60} P(q)$$, where $$P(q) = 50 - 0.5q$$

Question 5

Which of the following is NOT a necessary condition for a firm to successfully engage in price discrimination?

Accepted Answer

The firm must produce at the lowest possible average cost.

Question 6

If a monopoly is able to perfectly price discriminate, what happens to consumer surplus?

Accepted Answer

Consumer surplus is zero.

Question 7

A pharmaceutical company charges a higher price for its drug in the US than in India. This is an example of:

Accepted Answer

Third-degree price discrimination.

Question 8

Which of the following statements about price discrimination is TRUE?

Accepted Answer

Price discrimination can allow a monopoly to produce more than it would under uniform pricing.

Question 9

A monopoly sells a product at $$P = 100 - Q. If it $$can perfectly price discriminate, what is the profit-maximizing quantity if marginal cost is $$MC = 20$$?

Accepted Answer

$$Q^* = 80$$

Question 10

Which of the following is a real-world example of price discrimination?

Accepted Answer

An airline charging different prices for tickets based on booking time and customer characteristics.

Question 11

If a monopoly uses price discrimination to eliminate deadweight loss, what is the effect on total surplus?

Accepted Answer

Total surplus increases.

Question 12

Which formula represents the consumer surplus captured by a perfectly price discriminating monopoly?

Accepted Answer

$$CS = 0$$

Question 13

A monopoly faces two groups of consumers: Group A with demand $$Q_A = 50 - P$$ and Group B with demand $$Q_B = 30 - 0.5P. If $$the monopoly can segment the market, what type of price discrimination is this?

Accepted Answer

Third-degree price discrimination.

Question 14

Which of the following is a potential drawback of price discrimination for society?

Accepted Answer

It can reduce consumer surplus and increase inequality.

Question 15

If a monopoly charges each consumer their maximum willingness to pay, what is the resulting deadweight loss?

Accepted Answer

Deadweight loss is zero.

Question 16

A software company offers student discounts for its products. This is an example of:

Accepted Answer

Third-degree price discrimination.

Question 17

Which of the following is most likely to prevent a monopoly from engaging in price discrimination?

Accepted Answer

The inability to prevent resale among consumers.

Question 18

Suppose a monopoly can segment its market and charge $$P_1 to $$group 1 and $$P_2 to $$group 2. If $$P_1$$ \u003e $$P_2$$, what does this imply about the price elasticity of demand for group 1 compared to group 2?

Accepted Answer

Group 1 has a less elastic demand than group 2.

Price Discrimination and Monopoly Profit Maximization

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