If a monopoly engages in first-degree price discrimination,________.

Question

Quizplus · Accepted Answer

First-degree price discrimination allows the monopolist to charge each customer their maximum willingness to pay, which results in the highest possible revenue for the firm. This can lead to a more efficient allocation of resources and an increase in overall social surplus. Therefore, social surplus is maximized under first-degree price discrimination. Additionally, producer surplus is also maximized under this form of price discrimination. However, consumer surplus may be reduced or eliminated entirely. Deadweight loss, on the other hand, is minimized under first-degree price discrimination.

If a Monopoly Engages in First-Degree Price Discrimination,________