Explain why price discrimination solves the welfare loss problem of monopoly, but then describe the downside of solving the welfare loss problem this way.
What will be an ideal response?
By perfectly price discriminating, the monopolist moves quantity produced past the single price monopoly output to the perfect competitive solution. Thus the dead weight loss in consumer welfare disappears. However, by price discriminating the producer takes all the consumer surplus for himself so there is a significant redistribution of welfare from the consumer to the producer.
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The money multiplier equals
a. 1/R, where R represents the quantity of reserves in the economy. b. 1/R, where R represents the reserve ratio for all banks in the economy. c. 1/(1+R), where R represents the quantity of reserves in the economy. d. 1/(1+R), where R represents the reserve ratio for all banks in the economy.
Publicly provided health insurance for the poor will
A. raise the price of health care to the non-poor. B. increase the total amount of health care consumed. C. raise the price of health care to the non-poor and increase the total amount of health care consumed. D. raise the level of health care consumed by the non-poor.
Threats to in internal validity lead to
A) perfect multicollinearity B) the inability to transfer data sets into your statistical package C) failures of one or more of the least squares assumptions D) a false generalization to the population of interest
The GDP deflator is a measure of the overall change in prices in an economy:
A. based on goods and services valued at constant prices. B. using the ratio of real to nominal GDP. C. based on price-changes determined when output is held constant. D. using the ratio of nominal to real GDP.