Which of the following statements is TRUE?
I. Perfect price discrimination maximizes consumer surplus.
II. Perfect price discrimination maximizes gains from trade.
III. Under perfect price discrimination, the monopolist produces until price equals marginal cost.
A) I only
B) I and II only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

I is false because perfect price discrimination eliminates consumer surplus altogether.
II is true because perfect price discrimination maximizes total surplus by ensuring that every unit is sold at its maximum willingness to pay, thereby maximizing gains from trade.
III is true because in perfect price discrimination, the monopolist charges each consumer the maximum they are willing to pay for each unit, which equals the marginal cost of producing that unit, so the monopolist produces until price equals marginal cost.

Which of the Following Statements Is TRUE