Question

Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing? The government couldse point
a. regulate the monopoly
b. prohibited the monopoly from price discriminating
c. force the monopoly to operate at a point where its marginal revenue is equal to its marginal cost
d. None of the above would eliminate any inefficiency associated with a monopoly

Answer 1

The governmental action which would eliminate some or all of the inefficiencies that results from monopoly pricing is; Choice B; Prohibiting the monopoly from price discrimination.

Discussion:

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider(monopoly) in different markets.

In essence, when the government prohibits the monopoly from price discriminating, some of the inefficiencies of monopoly are eliminated.

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