The following figure depicts a generalized downward-sloping market demand (D)curve for a product.It also shows the firm's relevant marginal revenue (MR)curve and marginal cost (MC)curve.Use this figure to answer the following questions:

-If the firm moves from a perfect price-discrimination model to a perfect competition framework,there would be ________ in total welfare.
A) a loss of $160
B) a gain of $80
C) a loss of $40
D) a gain of $120
E) no change

Question

The following figure depicts a generalized downward-sloping market demand (D)curve for a product.It also shows the firm's relevant marginal revenue (MR)curve and marginal cost (MC)curve.Use this figure to answer the following questions:
 
-If the firm moves from a perfect price-discrimination model to a perfect competition framework,there would be ________ in total welfare.
A) a loss of $160 
B) a gain of $80 
C) a loss of $40 
D) a gain of $120 
E) no change

Quizplus · Accepted Answer

Moving from perfect price discrimination to perfect competition does not change total welfare. Perfect price discrimination allows the producer to capture all consumer surplus, converting it into producer surplus, but the total welfare (sum of consumer and producer surplus) remains the same as in perfect competition, where the welfare is maximized and shared between consumers and producers.

The Following Figure Depicts a Generalized Downward-Sloping Market Demand (D)curve