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Figure: PPV
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, deadweight loss will be:
A) $180.
B) $100.
C) $40.
D) $0.

Question

Use the following to answer questions:
Figure: PPV 
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, deadweight loss will be:
A) $180. 
B) $100. 
C) $40. 
D) $0.

Quizplus · Accepted Answer

In perfect price discrimination, the firm charges each consumer their maximum willingness to pay, capturing all consumer surplus and eliminating deadweight loss. Thus, the deadweight loss is $0.

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