(a)[12]
Two large hotel groups agreed to charge a lower price for rooms reserved through a booking agent than when guests requested a room on arrival at the hotel. Explain how price discrimination can happen and why it may be profitable, and decide whether the situation above is an example of price discrimination.
(b)[13]
Some argue that, where monopoly replaces a competitive market, the public loses out because prices are high and output is restricted. With the help of a diagram, consider how far economic theory supports this view.