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Homework answers / question archive / Sort the following characteristics by whether they describe competitive markets, firms that can perfectly price-discriminate, both, or neither
Sort the following characteristics by whether they describe competitive markets, firms that can perfectly price-discriminate, both, or neither. Items (4 items) (Drag and drop into the appropriate area below) result in some deadweight loss zero economic profit in the long run maximize total surplus eliminate consumer surplus Categories Competitive market Perfect price discrim. Both Neither Drag and drop here Drag and drop here Drag and drop here Drag and drop here
Solution:
Competitive market Perfect price discrimination Both Neither
zero economic profit in the long run eliminate consumer surplus maximize total surplus result in some deadweight loss
The perfect price discrimination arises when a firm charges a different price for every unit of the product consumed. As the firm will charge the maximum price for each product that enables the firm to capture the entire consumer surplus for itself. The perfect price discrimination eliminate deadweight loss .
In competitive markets keep prices relatively low thus allows the consumers to gain consumer surplus. In a competitive market, equilibrium price and quantity occurs where the quantity and price maximize the total surplus.
