If a monopolist were allowed (and able) to first degree price discrimination, there would be no efficiency/equity tradeoff so long as the government can tax the profits of the firm and redistribute the tax revenues in a lump sum way.

Question

Quizplus · Accepted Answer

First degree price discrimination involves the monopolist charging each individual consumer their willingness to pay for the good or service, maximizing profits without causing any deadweight loss or inefficiency in the market. With a lump sum tax on the profits of the monopolist, the government can redistribute the tax revenue in an equitable way and offset any potential unfairness from the price discrimination. Therefore, there is no efficiency/equity tradeoff in this situation.

If a Monopolist Were Allowed (And Able) to First Degree