(Scenario: A Small-Town Monopolist) Use Scenario: A Small-Town Monopolist.Compared with charging a single price,the deadweight loss: Scenario: A Small-Town Monopolist
A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and 175 subscriptions when the price is $10 a week.The MC for the provision of the cable is $5 a week.There are no fixed costs.

A) increases when this monopolist price-discriminates.
B) decreases when this monopolist price-discriminates.
C) stays the same when this monopolist price-discriminates.
D) is equal to zero.

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Sarah Childs · Accepted Answer

Final Answer : B, Explanation :  The monopolist can price-discriminate by charging different prices to different groups of customers based on their willingness to pay. By doing so, the monopolist can increase its profits and reduce the deadweight loss compared to charging a single price. In this case, the monopolist can charge a higher price of $15 a week to the customers who have a higher willingness to pay and a lower price of $10 a week to the customers who have a lower willingness to pay. This allows the monopolist to sell more subscriptions and reduce the deadweight loss. Therefore, the deadweight loss decreases when this monopolist price-discriminates.

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