Price discrimination is welfare reducing. A) False, price discrimination can increase the coverage of a market thereby increasing welfare. B) False, price discrimination limits the coverage of a market thereby increasing welfare. C) True, price discrimination limits the coverage of a market thereby increasing welfare. D) True, price discrimination can increase the coverage of a […]
If a firm faces a flat demand curve, A) it cannot engage in price discrimination. B) it can only engage in two-part tariffs. C) it can only engage in perfect price discrimination. D) None of the above. ANSWER A
Firms price discriminate to maximize total revenue. Indicate whether the statement is true or false ANSWER False. Firms price discriminate to increases profit.
A perfect-price-discriminating equilibrium maximizes A) consumer surplus. B) the associated deadweight loss. C) the market inefficiency. D) total welfare. ANSWER D
“Supporters of import restrictions and protectionist policies place greater weight on producer welfare than on consumer welfare.” Comment. What will be an ideal response? ANSWER Import restrictions increase the producer surplus of domestic producers. Consumer surplus, however, decreases by more than producers gain. Thus, the statement seems to be correct.
Tariffs and quotas create a loss in social welfare because A) producer surplus declines. B) revenues from tariffs are misspent. C) consumer surplus declines. D) All of the above. ANSWER C
Why do firms engage in price discrimination? A) to decrease cost B) to increase profits C) to increase consumer surplus D) to prohibit the resale of their products ANSWER B
The cost of lobbying for an import quota in a perfectly competitive market A) increases the welfare loss of the quota. B) decreases the deadweight loss of the quota. C) shifts the supply curve of the good to the left. D) increases the consumer surplus. ANSWER A
Which of the following conditions must be TRUE so that a firm can price discriminate? A) There are no other firms in the market. B) The good is a nondurable. C) The good cannot be easily resold. D) All of the above. ANSWER C
The welfare loss from an import quota is greater than that of an equivalent tariff because A) tariff revenues can be used to society’s benefit. B) the loss in consumer surplus is not as large. C) domestic producers gain more from a quota than from a tariff. D) tariff revenues represent an additional deadweight loss. […]
