The diagram below shows a pharmaceutical firm's demand curve and marginal cost and marginal revenue curves for a new heart medication for which the firm holds a 20- year patent on its production.
FIGURE 10- 5
-If a monopolist is practicing perfect price discrimination,then

Question

The diagram below shows a pharmaceutical firm's demand curve and marginal cost and marginal revenue curves for a new heart medication for which the firm holds a 20- year patent on its production.
  FIGURE 10- 5
-If a monopolist is practicing perfect price discrimination,then

Quizplus · Accepted Answer

When a monopolist practices perfect price discrimination, they charge each individual consumer their willingness to pay, which eliminates all consumer surplus. However, the monopolist can still earn producer surplus. Therefore, the correct choice is C, as consumer surplus is zero. Option A is incorrect because the monopolist can still earn producer surplus. Option B is not necessarily true, as the monopolist can still price discriminate even if demand is not perfectly inelastic. Option D is not necessarily true, as cost is not a determining factor in the ability to price discriminate. Option E is also incorrect, as the monopolist is still profit-maximizing by charging the highest possible prices to each individual consumer.

The Diagram Below Shows a Pharmaceutical Firm's Demand Curve and Marginal