**Title: Understanding Price Discrimination and Deadweight Loss****Overview:** The concept of price discrimination within economic theory is nuanced and has implications for market efficiency. One of the key considerations is whether price discrimination results in deadweight loss.**Multiple Choice Question:**Price discrimination does not create deadweight loss, because:**Options:**- O surplus is transferred from the consumer to the producer.- O all mutually beneficial transactions still occur.- O no government intervention is necessary to enable price discrimination.- O surplus is transferred from the producer to the consumer.- O a market in which firms can price discriminate already has deadweight loss.**Explanation:**Deadweight loss occurs when the production or consumption of a good is inefficient, leading to a loss of economic value. In the context of price discrimination, the primary consideration is whether all transactions that could benefit both the consumer and the producer are taking place. The idea is that if price discrimination is implemented effectively, it can ensure that transactions which maximize surplus do occur, potentially avoiding deadweight loss.### Detailed Explanation of Answer Choices:1. **Surplus is transferred from the consumer to the producer:** - This suggests a redistribution of surplus without necessarily impacting total surplus, but does not explain deadweight loss directly.2. **All mutually beneficial transactions still occur:** - This is a key argument against the creation of deadweight loss as it indicates that no potential gains from trade are left unrealized. 3. **No government intervention is necessary to enable price discrimination:** - While true, it is not directly relevant to the creation of deadweight loss.4. **Surplus is transferred from the producer to the consumer:** - Similar to the first option, this involves redistribution but doesn't clarify the impact on deadweight loss.5. **A market in which firms can price discriminate already has deadweight loss:** - This suggests prior inefficiency but doesn't address the impact of price discrimination on that inefficiency.Understanding these explanations offers insight into why price discrimination, when done effectively, might not lead to deadweight loss, ensuring all beneficial transactions occur and thus optimizing market efficiency.

The monopoly market would be a single seller and many buyers in the market. The monopoly market…

Price discrimination does not create deadweight loss, because O surplus is transferred from the consumer to the producer. all mutually beneficial transactions still occur. no government intervention is necessary to enable price discrimination. surplus is transferred from the producer to the consumer a market in which firms can price discriminate already has deadweight loss.

Price discrimination does not create deadweight loss, because O surplus is transferred from the consumer to the producer. all mutually beneficial transactions still occur. no government intervention is necessary to enable price discrimination. surplus is transferred from the producer to the consumer a market in which firms can price discriminate already has deadweight loss.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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