Which is a distortion (a loss of social surplus)associated with a monopolist's inability to observe consumer types when constructing a nonlinear pricing scheme?
A) the monopolist must expend more resources on market research.
B) all bundles involve inefficiently low quantities.
C) only some bundles involve inefficiently low quantities.
D) quantities aren't distorted, but prices extract too much consumer surplus.

Question

Quizplus · Accepted Answer

When a monopolist cannot observe consumer types, they may offer a menu of bundles to induce self-selection. This can lead to some bundles being inefficiently low in quantity to prevent high-type consumers from pretending to be low-type consumers, causing a distortion in social surplus.

Which Is a Distortion (A Loss of Social Surplus)associated with a Monopolist's