A monopolist can perfectly price discriminate:
A) when it can distinguish consumers with a high versus low willingness to pay.
B) when it offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay.
C) if it knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit.
D) whenever it chooses to as a result of its market power.

Question

Quizplus · Accepted Answer

Perfect price discrimination occurs when a monopolist can charge each customer their exact willingness to pay for each unit of the good or service, resulting in capturing all possible consumer surplus. This requires the ability to identify the willingness to pay of each customer and charge them accordingly. Option A refers to price discrimination based on customer characteristics, while option B is a form of imperfect price discrimination known as product differentiation. Option D is incorrect because market power alone does not guarantee the ability to perfectly price discriminate.

A Monopolist Can Perfectly Price Discriminate