(a)[12]
Cunard runs large passenger liners that provide transatlantic crossings between the US and the UK. Bigger cabins, including cabins with balconies, are sold at higher prices than smaller cabins. In addition, for the same cabin, travellers who buy the voyage in the US pay a much lower price than those who buy it in the UK. Cunard says that to buy in the US, the passenger must have a US address. Explain whether these are examples of price discrimination and consider whether price discrimination can be justified.
(b)[13]
Discuss whether firms in monopolistic competition are less efficient than firms in perfect competition.