Consider a monopolist which sells output in two markets, the home market and the foreign market. Initially the monopolist is unable to price discriminate and sets a single price for both markets
However, the demand in the foreign market is such that at the price the monopoly sets, no goods are sold in the foreign market. If the monopolist is then able to price discriminate, will the overall deadweight loss increase or decrease? Explain.
Since the monopolist is not pricing the good to sell in the foreign market, the price the monopolist sets when setting a single price is the same as if the monopolist were to only sell to the home market.
You might also like to view...
Offering to pay the passenger in front of you to keep her from reclining her airplane seat is an example of
A) a tradable exchange contract. B) a Pigovian solution to an externality situation. C) a Coasian solution to an externality situation. D) command-and-control policy.
A small business owner who is earning a positive economic profit, no matter how small, is doing better than if she sold her business and went to work for another firm
a. True b. False Indicate whether the statement is true or false