Question

Compare the welfare implications of perfect competition and a monopoly with first degree price discrimination. Under what conditions do we have market efficiency?

Answer 1

6. Two types of market like perfect competition and a monopoly are always acts as the determinant force in the global market. It has the distinctive features of trade activities related with international trade across all the countries producing different set of products. Let us compare the welfare implications of both extreme types of market competed relating to the first degree of price discrimination.

In the Perfect type of competition, the reputation and the good will plays the important role here. Apart from fixing the comfortable pricing system here, the production firms need to capture the pulse rate of tastes and preference for the consumers wish coinciding with the purchasing attitude. Such goods will be marketed very quickly with the Consumer surplus. Regular customers and the particular area who consumes the particular goods regularly are only given price discount leads to the first level of price discrimination.

In the Monopoly type, the production firms will fix the price in a such way that Average Revenue will always equals the Marginal revenue which always fetch the large volumes of sales with huge profit. It is not so mandatory to check the pulse rate of customers, but the single producing rights will induce the customers to buy from that particular product with the original price fixed by the monopoly oriented firms. This is the first level price level discrimination.

7. Market level efficiency are always calculated under following conditions.

1) Consumer surplus should always maintained at the equilibrium level without crossing the cost of production beyond the Average cost and the marginal cost.

2) Global economic crisis and the market conditions regulating by all the government policies are need to considered without any flaws and should reach the customers with higher reputation and inducing to buy all the products.