When a price-discriminating company charges some customers a higher price than it would have charged without price discrimination, total economic surplus
A)stays the same, but there is a transfer from buyers to sellers.
B)rises, with the seller receiving the increase.
C)stays the same, but there is a transfer from sellers to buyers.
D)rises with the gain shared by sellers and buyers.

Question

Quizplus · Accepted Answer

When a price-discriminating company charges some customers a higher price, it is essentially transferring some surplus from buyers to sellers. However, the total economic surplus stays the same, as the increase in seller surplus is offset by the decrease in buyer surplus. Therefore, the correct answer is A, as there is a transfer from buyers to sellers but the total economic surplus stays the same.

When a Price-Discriminating Company Charges Some Customers a Higher Price