Question

Perfect price discrimination a.increases profits to the firm. b.increases total surplus. c.decreases consumer surplus. d.All of the above are correct.

Answer 1

1. Answer is (d) all above are correct because In perfect discrimination firm charge maximum possible price for each unit of output. which leads higer profit to firm, there is no deadweigh loss so total surplus is increase but consumer surplus dicreased because each output are sold at maximum willingness to pay.

2. Answer is (b) It is regulated by govenment because price discrimination can be done to regulate supply like electricity price regulated by govenment which provide higher rate for commercial use and lower for domestic.

3. Answer is (b) Marginal cost will be less then price per unit of product because in monopoly market equilibrium condition satisfies that Price = Average revenue > MR = MC so it also demonstarte that Price of comodity is greater than MC.

4 Answer is (a) downward sloping demand curve and they can sell as much output as they disired at market price.