QUESTION 7 1 points Save Answer Using the information in the figure and table be
ID: 1111748 • Letter: Q
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QUESTION 7 1 points Save Answer Using the information in the figure and table below, which of the following statements is true? TABLE 11.1 The Welfare Effects of Parfect Price A monopolist thaterect price B+0 A+B+ A B+ O a. Consumers are just as well off in all three markets. O b. Producers are just as well off in all three markets. CDeadweight loss is the same in all three markets. competition or perfect price discrimination. d.Total welfare is lower in a monopoly that charges a single price than the monopoly in either perfect QUESTION 8 1 points Save Answer Which of the following statements is true? o a. In perfect price discrimination, the firm is able to convert the entire area of consumer surplus that existed under perfect competition into producer surplus. o b.For a monopoly there is an increase in total welfare for society compared to perfect competition. 1 There is a deadweight loss associated with perfect price discrimination. o d. There is no producer surplus associated with perfect price discriminationExplanation / Answer
7. d) Total welfare is lower in a monopoly that charges a single price than the monopoly in either perfect competition or perfect price discrimination.
Total welfare under monopoly that charges single price is (A + B) while monopoly under price discrimination is (A + B+ C) and perfect competition is (A + B + C)
8. a) In perfect price discrimination, the firm is able to convert the entire area of consumer surplus that existed under perfect competition into producer surplus.
Under perfect price discriminaion, firm charge each person their willingness price which leads to zero consumer surplus in the market. Under perfect competition, price is fixed which is equal to MC of firm. All area lies below the demand curve and above MC curve represents consumer surplus but under perfect price discrimination, this whole area converted into producer surplus.
9. c) Perfect price discrimination allows us to be at point where MC = D.
Under monopoly or monopolistic competition, firms produce output where MR = MC which lies before the quantity where MC = D. But under price discrimination, firm produce output where MC = D.
10. c) A golf instructor charges each customer a fee just under the customer's maximum willingness to pay for lessons.
Under perfect price discrimination, firm charges the highest price which consumer is willing to pay for the goods as done by the golf instructor in the example.
11. b) local restaurants.
Monopolistic competition refers to a market situation in which there are large number of buyers and sellers. The sellers sell closely related or differentiated products but not identical product. The products are close substitutes of each other. Product differentiation is the most important feature of monopolistic competition. Each firm under monopolistic competition enjoys the monopoly over the brand of the commodity and thus the firm has the control over the price of the commodity. Under monopolistic competition, MR < AR and AR and MR curve slope downwards and MR curve lies below AR curve. But these curves are more elastic. Example: Firms producing different brands of shampoos like Sunsilk, Pantene, Head & Shoulders, Dove etc. Monopolistic competition combines the features of monopoly and perfect competition.
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