Question

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market ________, whereas in perfect price discrimination ________.

Answer 1

Answer:

all units are sold where P = MC; only the last unit sold is at P = MC

Explanation:

In a perfectly competitive market, the number of sellers and buyers are large and they are all interested in homogeneous products and having perfect knowledge of the market. In such market, all produced units are based on recommendation to produce a quantity where P = MC and all these units are sold. On the other hand, a perfect price discrimination, the seller has the power to sell at any price and thus can afford to sell only the last units at P = MC.

Answer 2

Answer:

A difference between a perfectly competitive market equilibrium and a perfect price discrimination equilibrium is that in a competitive market marginal cost equals marginal revenue, whereas in perfect price discrimination marginal cost does not equal marginal revenue.

Explanation:

In a perfectly competitive market, equilibrium is only possible when marginal revenue equals marginal cost and marginal revenue curve is cut by the marginal cost curve from below.

Contrariwise, in a perfect discrimination, equilibrium is achieved irrespective of the nature of marginal cost; whether rising, constant or falling.