Suppose P = 20 ? 2Q is the market demand function for a local monopoly. The marginal cost is 2Q. The firm currently uses a standard pricing strategy. Which of the following will allow the firm to enhance the profits?
A. Engage in commodity bundling.
B. Engage in two-part pricing and engage in commodity bundling.
C. Engage in two-part pricing.
D. Engage in randomized pricing.
Answer: C
You might also like to view...
A monopolist will earn economic profits as long as his price exceeds:
a. marginal revenue. b. average fixed cost. c. average variable cost. d. average total cost.
Heuristics economize on the mental capabilities of people
Indicate whether the statement is true or false
The existence of wage-related rent
a. is explained by the fact that people have different opportunity costs b. is explained by the fact that some people who work also own land c. indicates that wage rates can be higher than rents d. is a contradiction because workers' incomes derive from labor e. result from the different productivities of workers
Recall the Application about the response of bike messengers in Zurich to a change in wages to answer the following question(s).Recall the Application. A study of the messengers in Zurich showed that as the messengers' revenue share increased from 40% to 50%, the bike messengers took more shifts but pedaled slower. If the increase in the revenue is similar to a wage increase, then the increase in the shifts taken is reflective of:
A. the income effect. B. the substitution effect. C. neither the income nor the substitution effect. D. both the income and the substitution effect.