Compared to the monopoly outcome with a single price, imperfect price discrimination can do which of the following?
(i) raise welfare
(ii) lower welfare
(iii) leave welfare unchanged
A)(i) and (ii)
B)(ii) and (iii)
C)(i) and (iii)
D)(i), (ii) and (iii)

Question

Quizplus · Accepted Answer

Imperfect price discrimination can have varying effects on welfare. It can raise welfare by better aligning price with consumers' willingness to pay, thus potentially increasing total surplus. It can lower welfare if it leads to a transfer from consumers to producers without increasing output or if it diminishes consumer surplus significantly. It can also leave welfare unchanged if the gains in producer surplus exactly offset the losses in consumer surplus, without changing the total output. Therefore, all three outcomes are possible depending on the specific circumstances of the price discrimination.

Compared to the Monopoly Outcome with a Single Price, Imperfect