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

Question

Quizplus · Accepted Answer

Single-price monopoly pricing is the least likely to benefit society as a whole because it does not allow for mutually beneficial trades between consumers and the seller to occur. The monopolist sets a single price that may be too high for some consumers to purchase the good or service, leading to a deadweight loss of consumer surplus. Additionally, the monopolist may not produce as much output as would be socially optimal, further reducing overall welfare. The other two pricing strategies, optimal two-part tariff pricing and perfect price discrimination, may extract consumer surplus but can still result in socially beneficial outcomes if the monopolist is able to produce more output and capture more consumer surplus through price discrimination or the two-part tariff.

Consider Three Pricing Strategies That the Firm Can Pursue