Perfect price discrimination:
A) eliminates all consumer surplus.
B) maximizes producer surplus.
C) creates no deadweight loss.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

Perfect price discrimination occurs when a monopolist charges each individual customer their willingness to pay, which eliminates all consumer surplus as consumers are paying the maximum price they are willing to pay. This maximizes producer surplus as the monopolist is able to extract the highest possible price from each consumer. Additionally, because the monopolist is able to extract the maximum possible price from each consumer, there is no deadweight loss. Therefore, all three statements are true.

Perfect Price Discrimination