Use the following figure to answer the question : Figure 12-2 : shows the downward sloping demand and marginal revenue [MR] curves and the upward sloping marginal cost [MC] curve of a monopolist.
-Refer to Figure 12-2.Compared to the situation when there is no price discrimination,first-degree price discrimination causes the consumer surplus to decline by the area:
A)ZVN.
B)CVF.
C)VWE.
D)EIF.

Question

Use the following figure to answer the question : Figure 12-2 :  shows the downward sloping demand and marginal revenue [MR] curves and the upward sloping marginal cost [MC] curve of a monopolist. 
-Refer to Figure 12-2.Compared to the situation when there is no price discrimination,first-degree price discrimination causes the consumer surplus to decline by the area:
A)ZVN. 
B)CVF. 
C)VWE. 
D)EIF.

Quizplus · Accepted Answer

First-degree price discrimination involves charging different prices for each unit of output based on the consumer's willingness to pay. In this case, the monopolist can extract the entire consumer surplus and convert it into producer surplus. The area of consumer surplus lost due to price discrimination is represented by the triangle VWE. This is because the monopolist can charge a higher price to the consumers with higher willingness to pay (i.e., consumers who are willing to pay more than the original price) and reduce their consumer surplus. Thus, compared to the situation with no price discrimination, consumer surplus declines by the area VWE.

Use the Following Figure to Answer the Question : Figure