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Questions › DSE › DSE 2014 › Q39
2 marks, −0.666666666666667Microeconomics › Monopoly and price discrimination › First- and second-degree price discrimination and two-part tariffsHardabout 3 min

DSE 2014 Question 39: Monopoly and price discrimination

A monopolist produces at constant marginal cost c≥0c\ge0c≥0 and sells the entire output to a consumer whose utility from xxx units is θx−t\theta\sqrt{x}-tθx​−t, where ttt is the payment. The consumer's outside option gives 000 utility. The monopolist's profit is

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A monopolist produces at constant marginal cost c≥0 and sells the entire output to a consumer whose utility from x units is θ√x-t, where t is the payment. The consumer's outside option gives 0 utility. The monopolist's profit is (A) θ/4c (B) θ²/4c (C) cθ² (D) cθ/2

Also written as: A monopolist produces at constant marginal cost c>=0 and sells the entire output to a consumer whose utility from x units is thetasqrt(x)-t, where t is the payment. The consumer's outside option gives 0 utility. The monopolist's profit is

Monopoly and price discrimination has come up 128 times in 7 exams since 2004.

What this question tests

This question is on First- and second-degree price discrimination and two-part tariffs, part of Monopoly and price discrimination in Microeconomics.

Charging different prices by consumer or by quantity, up to perfect discrimination and two-part tariffs.

TestStop has 19 past-paper questions on this subtopic.

Practise Monopoly and price discriminationMore on First- and second-degree price discrimination and two-part tariffs

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Question from the DSE 2014 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.