Assume that a monopolist practices perfect price discrimination.The firm will produce an output
A)that is less than the efficient level of output.
B)that is greater than the efficient level of output.
C)that is equal to the efficient level of output.
D)that converts consumers surplus into a deadweight loss.

Question

Quizplus · Accepted Answer

Perfect price discrimination results in the monopolist charging each individual consumer their maximum willingness to pay, which eliminates any consumer surplus. As a result, the monopolist will produce the efficient level of output, which maximizes total surplus (consumer surplus + producer surplus). Therefore, the monopolist will produce the same output level as under perfect competition, which is the socially efficient level of output.

Assume That a Monopolist Practices Perfect Price Discrimination