From an Economic Perspective, Price Discrimination Is Desirable Because

question 19

Multiple Choice

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.

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Definitions:

Lump-Sum Tax Rate

A tax that is a fixed amount, no matter the change in circumstance of the taxed entity. This creates a situation where the tax burden falls more heavily on those with lower income or profit.

Marginal Tax Rate

The amount of tax applied to an additional dollar of income, often used in progressive tax systems.

Average Tax Rate

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), expressing the percentage of income that is paid in taxes.

Income

Monetary payment received for work, from investments, or from government benefits, contributing to an individual's wealth.