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.Comparing the result of perfect competition with that of a perfectly price-discriminating monopolist,there is an efficiency loss equal to:
A)area VWE.
B)area HEF.
C)area JHFK.
D)zero.There will be no efficiency loss in either case.

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.Comparing the result of perfect competition with that of a perfectly price-discriminating monopolist,there is an efficiency loss equal to:
A)area VWE. 
B)area HEF. 
C)area JHFK. 
D)zero.There will be no efficiency loss in either case.

Quizplus · Accepted Answer

In the case of a perfectly price-discriminating monopolist, they are able to charge each consumer the maximum they are willing to pay, thus capturing all consumer surplus and converting it into producer surplus. This process results in no deadweight loss because the monopolist is able to sell the socially optimal quantity of goods, just as in perfect competition. Therefore, there is no efficiency loss, making the correct answer D.

Use the Following Figure to Answer the Question : Figure