Which of the following is an example of a price-discriminating monopoly?

• A. A perfectly competitive wheat farmer selling at market price
• B. A movie theater charging different prices for adults and children
• C. A monopolist charging the same price to all customers
• D. A government-regulated utility with fixed rates for all users

Answer: (B)

Verified step by step guidance

1. Understand the concept of price discrimination: it occurs when a monopoly charges different prices to different groups of consumers for the same product, based on their willingness or ability to pay.
2. Identify the characteristics of a price-discriminating monopoly: it must have market power (monopoly or near-monopoly) and be able to segment the market into groups with different price elasticities of demand.
3. Analyze each option: a perfectly competitive wheat farmer cannot price discriminate because they are price takers; a monopolist charging the same price to all customers is not price discriminating; a government-regulated utility with fixed rates also does not price discriminate.
4. Recognize that a movie theater charging different prices for adults and children fits the definition of price discrimination because it charges different prices to different groups based on their demand characteristics.
5. Conclude that the example of a movie theater charging different prices for adults and children is a clear case of price discrimination by a monopoly or a firm with some market power.