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)Some but not all 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, it offers a menu of bundles to induce self-selection. Some consumers may end up with bundles that have inefficiently low quantities to prevent high-type consumers from mimicking low-type consumers, leading to a distortion in social surplus.

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