From an economic perspective, price discrimination is desirable because
A)the increase in profits is more than offset by the loss in consumer surplus, resulting in a net increase in economic surplus.
B)it enables firms to increase profits with no loss in economic surplus, and in turn, this could provide firms with incentives to engage in beneficial product innovation.
C)the increase in profits results in higher corporate tax revenues received by the government which could be used to subsidize consumption for low-income individuals.
D)it redistributes wealth from wealthy consumers to highly innovative firms.

Question

Quizplus · Accepted Answer

Price discrimination allows firms to capture a portion of the consumer surplus that would otherwise be lost. This results in an increase in profits without a loss in economic surplus, as consumers who value the product more are willing to pay a higher price. This could also provide firms with incentives to engage in beneficial product innovation in order to attract different segments of consumers. Therefore, price discrimination can be beneficial for both firms and consumers, as it encourages firms to innovate and offer products at different price points, which allows consumers to purchase products at a price they are willing to pay.

From an Economic Perspective, Price Discrimination Is Desirable Because