"Price discrimination allows a monopoly to increase its economic profit by capturing part of the consumer surplus and turning it into economic profit
" Is the previous statement correct or incorrect? If the statement is correct, why is it important in understanding firms' behaviors? If it is incorrect, why is it incorrect?
The statement is correct. The statement is important because it explains why firms want to price discriminate, namely because they can convert some of the consumer surplus into extra economic profit. Hence firms endeavor to price discriminate because if they can do so, they can increase their economic profit.
You might also like to view...
Which of the following statements is true?
A. Above the optimal tax rate, a reduction in tax rates along the downward-sloping portion of the Laffer curve would increase tax revenues. B. According to supply-side fiscal policy, lower tax rates would shift the aggregate demand curve to the right, expanding the economy and creating some inflation. C. The presence of the automatic stabilizers tends to destabilize the economy. D. To combat inflation, Keynesians recommend lower taxes and greater government spending.
The data show Argentina's GDP (using purchasing power parity) in billions of dollars
Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 GDP($) 182 209 235 255 277 274 294 324 340 333 338 330 300 Year 2003 2004 2005 2006 GDP($) 333 373 420 470 The data show that A) Argentina's economy was in a recession from 2004 through 2006. B) Argentina's economy was in a recession in 2001 and 2002. C) GDP per person more than doubled between 1990 and 2006. D) Argentina's economy reached a peak in 1996.
Good news about an economic indicator __________ the denominator of a bond's valuation formula, __________ the bond's price
A) raises; raising B) raises; lowering C) lowers; raising D) lowers; lowering
Macroeconomists study
a. the decisions of individual households and firms. b. the interaction between households and firms. c. economy-wide phenomena. d. regulations imposed on firms and unions.