Using the above information, if the publisher cannot price-discriminate then there is a dead-weight loss equal to:
A)$0
B)$80 000
C)$120 000
D)$200 000

Question

Quizplus · Accepted Answer

Without price discrimination, the publisher must sell all books at the same price. This means that some buyers who were willing to pay more (up to $120) will only pay the lower price ($80). As a result, there is a dead-weight loss equal to the area of the triangle formed by the demand curve, the supply curve, and the price that the publisher charges. This area is (1/2)(40,000)(120-80) = $800,000. Therefore, the dead-weight loss is $120,000 (=10% x $1,200,000).

Using the Above Information, If the Publisher Cannot Price-Discriminate Then