In a competitive market with high cost and low cost consumers (where firms are unable to tell consumer types apart), any screening costs incurred by firms will be passed on to low cost consumer but not to high cost consumers.
Answer the following statement true (T) or false (F)
True
Rationale: These costs have to be passed on to consumers because firms have to make zero profit in equilibrium. But they can't be passed on to high cost consumers -- because firms could always offer a price equal to the high MC and make at least zero profit. So they must be passed to low cost consumers.
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