Actions for Discussion Activity #8 A pure monopolist is a single firm (producer

Question

Actions for Discussion Activity #8 A pure monopolist is a single firm (producer or seller) that sells a product with no good close substitutes. An unregulated monopolist is also likely to engage in ‘price discrimination’. Refer to the definition in the textbook. Assume that there is only one Movie Theater in your home town (as in River Falls,Wisconsin). In order to increase profits, the Movie Theater (a monopolist) could: (i) Charge one high price for all the movies shown; or (ii) Charge different prices depending on the day of the week, time of the week; offer discounts to children, students and senior citizens ; thereby engaging in ‘price discrimination’. Which of the two strategies do you believe will result in higher profits for the Movie Theater? Explain fully!

Explanation / Answer

The second strategy that is where the monopolist practice price discrimination is the best strategy because under price disrimination he can cover all the customers which he will not be able to dowith single price. The price discrimination will lead him to capture maximum or all of the consumer surplus. Thus maximizing the profit.

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