Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on:
a. efficiency.
b. consumer surplus.
c. economic profit in the long run.
a. Both perfect competition and perfect price discrimination create efficiency.
b. Consumers receive consumer surplus with perfect competition. However, there is no consumer surplus with perfect price discrimination.
c. Perfectly competitive firms cannot earn an economic profit in the long run. A perfectly price discriminating monopoly earns the maximum amount of economic profit.
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Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David's consumption of wine is:
A) 4 bottles. B) 9 bottles. C) 7 bottles. D) 12 bottles.
Benefits that accrue directly to the decision maker of a market exchange are called:
A. social benefits. B. network benefits. C. external benefits. D. private benefits.