Consider three pricing strategies that the firm can pursue:
a. optimal two-part tariff pricing
b. perfect price discrimination
c. single-price monopoly pricing.
Of these three strategies, which is least likely to benefit society as a whole?
A) a two-part tariff pricing because consumers have to pay a fixed fee in addition to a per-unit price
B) perfect price discrimination because those willing to pay higher prices are forced to subsidize those who are not
C) Both perfect price discrimination and two-part tariff pricing do not benefit society because the entire consumer surplus is extracted by the producer.
D) single-price monopoly pricing because there are mutually beneficial trades (between consumers and seller) that are not exploited

Question

Consider three pricing strategies that the firm can pursue: 
a. optimal two-part tariff pricing
b. perfect price discrimination
c. single-price monopoly pricing.
Of these three strategies, which is least likely to benefit society as a whole?
A) a two-part tariff pricing because consumers have to pay a fixed fee in addition to a per-unit price
B) perfect price discrimination because those willing to pay higher prices are forced to subsidize those who are not
C) Both perfect price discrimination and two-part tariff pricing do not benefit society because the entire consumer surplus is extracted by the producer.
D) single-price monopoly pricing because there are mutually beneficial trades (between consumers and seller) that are not exploited

Quizplus · Accepted Answer

Single-price monopoly pricing is least likely to benefit society because it results in deadweight loss, where some mutually beneficial trades between consumers and the seller are not realized, leading to inefficiency.

Consider Three Pricing Strategies That the Firm Can Pursue