Explain how consumer surplus changes when a monopoly price discriminates
What will be an ideal response?
When a monopoly price discriminates, it charges different prices for different units of the product or it charges different prices to different consumers. Consumer surplus is the value (or marginal benefit) of a good minus the price paid for it, summed over the quantity bought. When the monopoly price discriminates, it decreases the consumer surplus on the units for which it charges a higher price to its initial customers. But it increases the consumer surplus on units for which it charges a lower price to new customers. If a monopoly is able to perfectly price discriminate, it totally eliminates consumer surplus because it charges every consumer the highest price the consumer is willing to pay.
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Explain how government deficits fell yet current account surpluses remained the same in the EU prior to adopting the euro. Also explain this in the context of the "twin deficits" theory
What will be an ideal response?
We cannot predict the effect on the market clearing price, but know that the equilibrium quantity will decrease when
A) supply increases and demand decreases B) supply decreases and demand increases. C) supply and demand for a product simultaneously decrease. D) supply and demand for a product simultaneously increase.