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
What will be an ideal response?
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 make an economic profit in the long run. A perfectly price discriminating monopoly makes the maximum amount of economic profit.
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If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that
a. we are both at least as well off as we were before b. I am better off than I was before, but you are not c. you are better off than you were before, but I am not d. we are both better off than before e. we are both worse off than before
If two goods are strong substitutes, cross elasticity is
a. negative b. positive c. between zero and one d. zero e. one