Monopoly pricing & price discrimination: Practice Questions

When a monopolist sells the same product at different prices to different customers, where the price differences are not justified by differences in cost, this practice is known as:

A university charges different tuition fees for domestic students and international students for the same course. For this to be a successful example of price discrimination, what must the university be able to do?

If a monopolist is able to practice first-degree (perfect) price discrimination, which of the following outcomes will occur?

(i) Consumer surplus is zero.
(ii) The output level is the same as that of a perfectly competitive market.
(iii) There is no deadweight loss.

Which of the following is a necessary condition for a monopolist to successfully practice third-degree price discrimination?

A national airline offers different ticket prices for business class passengers and economy class passengers on the same flight, even though the cost of providing the flight service is largely similar for all passengers in a given class. This practice is an example of price discrimination. What is the primary economic reason this airline can increase its profits by charging different prices to these groups?

Under simple monopoly pricing, why is the marginal revenue (\(MR\)) always lower than the market price (\(P\)) for any positive level of output?

A monopolist segments its market into Group A (high price elasticity of demand) and Group B (low price elasticity of demand). Explain which group will be charged a lower price under third-degree price discrimination.

Why is the prevention of resale (arbitrage) more difficult for physical consumer goods compared to personalized digital services when a firm attempts to practice third-degree price discrimination?

Define a simple monopolist and explain, using marginal analysis, why a monopolist chooses to produce at an output level where \(MR = MC\) to maximize its total profit. In your explanation, describe what happens if the firm produces slightly less or slightly more than this optimal output.

Compare a monopoly market under uniform pricing with a perfectly competitive market. With the aid of a supply-demand diagram showing the marginal benefit and marginal cost curves, explain why the profit-maximizing output of a simple monopolist leads to a deadweight loss. Why is this outcome considered allocatively inefficient?