Compared to charging a single price to everyone,perfect price discrimination results in
A) a surplus minimizing level of output.
B) greater profit for the monopolist.
C) more unsatisfied consumers.
D) greater losses for the monopolist.
E) greater consumer surplus.

Question

Quizplus · Accepted Answer

Perfect price discrimination allows the monopolist to charge each consumer their maximum willingness to pay, resulting in higher profits for the monopolist compared to charging a single price to everyone. Therefore, choice B is the correct answer. The other options are incorrect: A is incorrect because perfect price discrimination results in the monopolist producing at the efficient level of output (where marginal cost equals the maximum willingness to pay of each consumer), which maximizes total surplus (not minimizing surplus); C is incorrect because consumers who are charged a price they are willing to pay will not be unsatisfied; D is incorrect because perfect price discrimination results in higher profits for the monopolist (not greater losses); and E is incorrect because while some consumers may pay less than they would under a single price, others will pay more, leading to a transfer of surplus from consumers to the monopolist (not greater consumer surplus overall).

Compared to Charging a Single Price to Everyone,perfect Price Discrimination