Question

1. True or false?
   1. (2 points) A price-discriminating monopolist will always create deadweight loss.

2. (2 points) A monopoly market has barriers to entry and no close substitutes.

3. (2 points) Unlike the monopolist, a monopolist creates an efficient market by payer workers less.

4. (2 points) All else equal, the lower the price, the higher the consumer surplus.

5. (2 points) A tax on buyers does not change the producer surplus because it is paid by consumers.

Answer 1

Ans) 1) False. If a monopolist is able to perfectly price discriminate, there will be deadweightloss.

Perfect price discrimination by monopolist Profit MC

2) True. Monopoly is characterised by single seller selling unique product i.e product has no close substitute. There is barrier to entry and exit in monopoly.

3) Please check the question.

4) True. Consumer surplus is the difference between person's willingness to pay and actual price paid by the buyer. So, lower the price, more the consumer surplus.

5) False. When tax is imposed by government (assuming that no side is Perfectly elastic or inelastic), tax burden is shared by both buyers and sellers. It does not matter upon whom the tax is levied. It reduces both consumer and producer surplus.