Perfectly price-discriminating monopolists charge:
A) each consumer his or her maximum willingness to pay, so consumer surplus is zero.
B) all consumers the average of their willingness to pay, so consumer surplus is maximized.
C) each consumer his or her maximum willingness to pay, so consumer surplus is maximized.
D) all consumers the average of their willingness to pay, so consumer surplus is zero.

Question

Quizplus · Accepted Answer

A perfectly price-discriminating monopolist charges each consumer their maximum willingness to pay. This means that the monopolist captures all the consumer surplus as profit, leaving no surplus for the consumer. Therefore, consumer surplus is zero. Choice B is incorrect because charging the average willingness to pay would not allow the monopolist to capture all the consumer surplus. Choices C and D are also incorrect, as explained above.

Perfectly Price-Discriminating Monopolists Charge