Question

complete the following table by indicating under which market conditions each of the statements is true. (note: if the statement isn't true for either single-price monopolies or perfect price discrimination, leave the entire row unchecked.) check all that apply.

Answer 1

Single-price monopolies may produce fewer units of output than perfect price discrimination when facing elastic demand.

Single-price monopolies may charge a higher price than perfect price discrimination when facing inelastic demand.

The statement is true under the condition of elastic demand.

Step-by-step explanation:

Single-price monopolies may produce fewer units of output than perfect price discrimination when facing elastic demand:

In this scenario, the statement is true under the condition of elastic demand. When a single-price monopoly faces elastic demand, reducing the price would lead to a proportionally larger increase in quantity demanded. However, due to a fixed price, the single-price monopoly may choose to produce fewer units compared to perfect price discrimination, where the firm can tailor prices to each consumer's willingness to pay, optimizing output.

Single-price monopolies may charge a higher price than perfect price discrimination when facing inelastic demand:

This statement holds true under the condition of inelastic demand. In cases of inelastic demand, consumers are less responsive to changes in price. A single-price monopoly, faced with inelastic demand, can charge a higher price without a significant reduction in quantity demanded. In contrast, perfect price discrimination allows the firm to charge each consumer their maximum willingness to pay, potentially resulting in lower prices overall.

The statement is true under the condition of elastic demand.

Answer 2

Perfect competition is a theoretical market structure with strict conditions, such as homogeneity of products and no transaction costs. These conditions are rarely met in reality, leading to imperfect competition in the form of monopolistic competition, oligopoly, and monopoly. The specific conditions like single-price monopolies or perfect price discrimination require additional details to accurately complete the table mentioned.

Step-by-step explanation:

Understanding the conditions of perfect competition is essential in the context of economics and market structures. Perfect competition is defined by specific conditions that rarely exist in real-life markets but are used as a benchmark to understand and study market behaviors and efficiency.

Perfect competition requires:

Many buyers and sellers

Homogeneous products

Free entry and exit in the market

Perfect information

No transaction costs

When these conditions are not met, we encounter imperfect competition, which includes market structures like monopolistic competition, oligopoly, and monopoly. Single-price monopolies and perfect price discrimination are types of imperfect competition that can create diverse economic outcomes. For instance:

Single-price monopolies can lead to higher prices and reduced output compared to perfect competition.

Perfect price discrimination, however, allows a monopolist to charge the maximum price that consumers are willing to pay, potentially leading to an efficient allocation of resources comparable to perfect competition but resulting in no consumer surplus.

To clarify the specific market conditions for single-price monopolies and perfect price discrimination, a more detailed description of the statements and the completion of the given table are required. Unfortunately, with the current information provided, the completion of the table is not feasible.