Question

Use the following statements to answer this question:

Answer 1

Answer:

B) I is true and II is false.

Explanation:

When the market price is held above the competitive level, the deadweight loss is composed of

producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.

Therefore the second statement is wrong.

Answer 2

Answer:

The correct answer for this one is B) I is true and II is false.

Explanation:

This is an economics question and speaks to the topic of Consumer Surplus which is is a measurement of consumer benefits.

Consumer surplus occurs when the price that consumers pay for a good or service is less than the amount they're willing to pay. That is, a situation where a consumer is willing to pay more for a given product than the current market price.

I. When the market price is held above the competitive price level, it is possible for the loss in consumer surplus to be fully captured by producers.

II. When the market price is held above the competitive level, there is no dead-weight loss because producer gains exactly equal consumer losses.

Through perfect price discrimination, consumer surplus can be fully captured by producer surplus which also would mean that no dead-weight loss exists. Of course, it should be noted that this is a theoretical concept hard to find in the real world, if even possible at all.  

Cheers!