Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate,then
A) Arnie's profit decreases.
B) consumer surplus decreases.
C) Arnie's revenues decrease.
D) Arnie's sells fewer tickets.
E) Arnie's will see all of his tickets at a single price.

Question

Quizplus · Accepted Answer

Price discrimination allows a monopolist like Arnie's Airlines to charge different prices to different groups of customers based on their willingness to pay. This allows Arnie's to sell more tickets at a higher price to customers with a higher willingness to pay, while also selling some tickets at a lower price to customers with a lower willingness to pay. By doing this, Arnie's can increase its profits by capturing more of the consumer surplus (i.e. the difference between what customers are willing to pay and what they actually pay). However, this means that some consumers will be charged a higher price than they would in a competitive market, leading to a reduction in overall consumer surplus. Therefore, the best choice is B, as only consumer surplus decreases when Arnie's Airlines decides to price discriminate.

Arnie's Airlines Is a Monopoly Airline That Is Able to Price