Question

1. Compared to the monopoly outcome with a single price, imperfect price discrimination

   (i)	sometimes raises total surplus.
   (ii)	sometimes lowers total surplus.
   (iii)	always leads to a lower quantity of output.

   	a.	(i) and (iii) only
   	b.	(i), (ii), and (iii)
   	c.	(ii) and (iii) only
   	d.	(i) and (ii) only

2. For a monopoly firm, which of the following equalities is always true?

   	a.	marginal revenue = marginal cost
   	b.	price = average revenue
   	c.	price = total revenue
   	d.	price = marginal revenue

Answer 1

1. Option D.

• When we compare the monopoly outcome with a single price, imperfect price discrimination can sometimes raise total surplus and sometimes lower the total surplus.
• It can sometimes leave the total surplus undisturbed within the market.
• Hence, only price discrimination will always increase the profits of a monopoly firm.

2. Option B.

• A monopoly firm without price discrimination always charges same price to all its customers.
• It always tries to earn higher revenues and profits by charging higher prices.
• These price's usually match the average revenue received by them.
• Hence for a monopoly firm, price equals average revenue.