When a price-discriminating company lowers price for potential new customers who wouldn't buy otherwise, total economic surplus
A)stays the same, but there is a transfer from buyers to sellers.
B)rises, with the buyers receiving all 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

Lowering the price for potential new customers increases the total economic surplus as it brings in new buyers who were previously not willing to pay the higher price. This creates additional consumer surplus for the new buyers and additional profit for the seller. Therefore, the total economic surplus rises with the gain shared by both sellers and buyers.

When a Price-Discriminating Company Lowers Price for Potential New Customers