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Explain whether the following are true, false, or uncertain. (a) Whether an industry is competitive or...

Explain whether the following are true, false, or uncertain.

(a) Whether an industry is competitive or monopolized, the equilibrium output level lies along the elastic portion of the demand curve.

(b) If you care only about eliminating deadweight loss, then you are indifferent between a monopolist engaging in perfect price discrimination and a monopolist being forced by a regulatory agency to use marginal cost pricing.

I already know that a) is False and that b) is True. I would love an explanation to better understand though. Thank you!

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Answer #2

A) answer a) is false because in case of a perfect competition, the firm can produce at any portion of the demand curve.

B) under a perfect price discrimination, the monopolist charges a different price for each unit sold such that the entire consumer surplus is being captured by it. Thus, the total surlpus is the producer surplus and the dead-weight loss is zero and in case of marginal pricing, price is equal as in case of a competitive market where the dead weight loss is zero.

Thanks!

answered by: anonymous
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