True/False1. Monopoly with perfect price discrimination will reach profit equals consumer surplusof perfect competition market plus profit of perfect competition market, whether inshort run or long run.2. Perfect price discrimination can reduce economic welfare because output decreasesbeyond that which would result under monopoly pricing.3. The inefficiency associated with monopoly is due to overproduction of the good.

Answered: True/False

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Monopoly

Section: Chapter Questions

Problem 6CQQ

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Question

True/False
1. Monopoly with perfect price discrimination will reach profit equals consumer surplus
of perfect competition market plus profit of perfect competition market, whether in
short run or long run.
2. Perfect price discrimination can reduce economic welfare because output decreases
beyond that which would result under monopoly pricing.
3. The inefficiency associated with monopoly is due to overproduction of the good.

Expert Solution

Step 1

Monopoly: It refers to that competition in which the producer has all the power in the market. The producer is the price maker in the monopoly market and has a great influence on the market.

Perfect competition: It refers to the competition in which the producer has to take the price, and the small numbers of the firms are there in the market, which does not have any sufficient rate of influence on the market.

Step 2

The first statement is not true because the monopoly cannot charge the price as perfect because they are price makers in the market. The monopoly cannot reach the perfect competition producers' profits because the firms are not able to produce on the MR=MC curve.
This statement is true because as the perfect price discrimination will occur, this will reduce the welfare of the economy, and the people will have to fight for an equal amount of the goods. It will decrease welfare, and monopoly pricing will occur, and the producers will try to charge different prices from different consumers.
The monopoly will never do overproduction, and the inefficiency occurs because of the producer's high prices and due to which this statement is false.

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