Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A movie theater charges a higher ticket price for evening shows compared to matinee shows to capture consumer surplus.
B
A local cafe sells coffee at a fixed price regardless of customer demand variations throughout the day.
C
A smartphone manufacturer sells all its products at the same price to all customers, regardless of their income levels.
D
A book publisher offers discounts on bulk purchases without altering the price for single copies.
Understanding the Answer
Let's break down why this is correct
Answer
A monopolist is a single seller in a market that has the power to set prices. To maximize profits, they often use a strategy called price discrimination, where they charge different prices to different customers based on their willingness to pay. For example, imagine a movie theater that charges $10 for a regular ticket but offers a discount of $5 for students. The theater knows that students might not pay the full price, so by offering a lower price, it attracts more customers while still making a profit from those who can afford to pay more. This way, the monopolist can sell more tickets overall, maximizing their total revenue.
Detailed Explanation
The movie theater charges different prices for different times. Other options are incorrect because The cafe uses a fixed price for coffee, which means it doesn't change prices based on demand; The smartphone maker sells at the same price for everyone.
Key Concepts
Profit Maximization in Monopolies
Price Discrimination
Consumer Surplus
Topic
Profit Maximization in Monopolies
Difficulty
easy level question
Cognitive Level
understand
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