Which of the following can eliminate the inefficiency inherent in monopoly pricing?
A)arbitrage
B)cost-plus pricing
C)price discrimination
D)regulations that force monopolies to reduce their levels of output

Question

Quizplus · Accepted Answer

Price discrimination can eliminate the inefficiency inherent in monopoly pricing as it allows the firm to charge different prices to different groups of consumers based on their willingness to pay, thereby maximizing profits while ensuring that more consumers are able to purchase the good or service. This can result in a more efficient allocation of resources as the firm is able to capture more of the consumer surplus. Arbitrage involves buying a good or service in one market and selling it in another to take advantage of a price differential, but this may not be effective in eliminating inefficiencies in monopoly pricing. Cost-plus pricing involves determining the price of a good or service based on its production costs, which may not result in an efficient allocation of resources. Regulations that force monopolies to reduce their levels of output may reduce inefficiencies but may also result in decreased innovation and investment by the monopolies.

Which of the Following Can Eliminate the Inefficiency Inherent in Monopoly