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) When it cannot distinguish consumers with a high versus low willingness to pay

Question

Quizplus · Accepted Answer

Perfect price discrimination occurs when a monopolist is able to charge each customer based on their own willingness to pay. This requires the monopolist to know each customer's willingness to pay and charge different prices accordingly. Option A describes imperfect price discrimination based on distinguishing consumers with different willingness to pay, while option B describes menu pricing, which is also a form of imperfect price discrimination. Option D is incorrect as perfect price discrimination requires the ability to distinguish customers' willingness to pay.

A Monopolist Can Perfectly Price Discriminate