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- QUESTION
Please write a discussion post about provided topic down below. Please do not use any outside resources. Also please read the instructions carefully and all the way through before you start this assignment.
Discussion: Price Discrimination, Welfare, and Efficiency
A monopoly can use price discrimination to increase profit. By segmenting markets, a monopoly maximizes profits by setting a higher price in markets with more inelastic demand, and charging a lower price in markets with more elastic demand.
Whether price discrimination is good or bad for society as a whole? How does price discrimination affect output, and what is this effect on social welfare? Does price discrimination lead to a more efficient or less efficient outcome?
Watch the Video:
Price Discrimination (I)
https://www.youtube.com/watch?time_continue=2&v=dJ5unKvYgcU&feature=emb_logo
Watch the Video:
Price Discrimination and Social Welfare
https://www.youtube.com/watch?time_continue=27&v=w5f7VvK8Pkk&feature=emb_logo
Discussion Topic: Price Discrimination, Welfare, and Efficiency
Whether price discrimination is good or bad for society as a whole?
How does price discrimination affect output, and what is this effect on social welfare?
Does price discrimination lead to a more efficient or less efficient outcome?
Share your thoughts.
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Business |
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4 |
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APA |
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Answer
Price Discrimination, Welfare, and Efficiency
Price discrimination refers to the scenario where the monopolist charges different prices for the same goods or services to different groups of consumers. Since some consumers pay higher prices while others pay low, the primary quest has often been to determine whether price discrimination is good or bad for society. Primarily, price discrimination is good for monopolists because it increases their profitability. However, to the society, the rule of thumb applies. That is, if price discrimination increases output, then it is likely beneficial to increase social welfare and vice versa. Therefore, price discrimination is suitable in cases where it improves social welfare.
Since price discrimination capitalizes on the inelasticity and elasticity of demand in the various markets, it allows the firm to sell the goods and services at much higher output levels. This is because it gives the less privileged in the society a chance to buy at a lower price while also ensuring the other markets pay in a way that the monopolist remains highly profitable. Necessarily, under fixed prices, the poor or individuals with low-income will unlikely purchase the goods, which then reduces the level of output. Consequently, the practice has a beneficial effect on social welfare since the living standards are likely to increase by allowing the market segment to pay less and enjoy a greater diversity of goods.
Price discrimination leads to a more efficient outcome as it works for the benefit of the firm and society. That is, as long as the firm can prevent arbitrage, it keeps producing until the efficient quantity of output with all the gains going to the producer rather than the consumer as in the case of perfect competition. They provide at every consumer’s willingness to pay, which has to be higher than the marginal cost. Furthermore, since it allows the firm to sell at a higher output level, the firm becomes more efficient since it can make good use of the spare capacity and factors of production, which then minimizes the long-run costs.
References
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Appendix
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Appendix A:
Communication Plan for an Inpatient Unit to Evaluate the Impact of Transformational Leadership Style Compared to Other Leader Styles such as Bureaucratic and Laissez-Faire Leadership in Nurse Engagement, Retention, and Team Member Satisfaction Over the Course of One Year
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