Assume a monopolist can prevent resale of its product and it has complete information about each one of its customers. Even though each customer has a different demand curve, the seller can identify each customer's demand curve before a purchase takes place. It faces the inverse market demand of P = 160 - 10Q with marginal cost of MC = 10 + 5Q. The deadweight loss at the profit-maximizing result is $____.
A) 500
B) 400
C) 200
D) 0

Question

Quizplus · Accepted Answer

Given the monopolist can perfectly price discriminate (charge each customer exactly their willingness to pay), it can capture the entire area under the demand curve down to its marginal cost curve. This means it can sell to every customer whose willingness to pay is above the marginal cost of production, eliminating deadweight loss entirely.

Assume a Monopolist Can Prevent Resale of Its Product and It