When a monopolist practices perfect price discrimination,
A)consumers receive no consumer surplus
B)there is allocative inefficiency
C)there is a deadweight loss
D)profit is lower than for the nondiscriminating monopolist
E)total revenue is less than for the nondiscriminating monopolist

Question

Quizplus · Accepted Answer

Perfect price discrimination occurs when a monopolist charges each consumer their maximum willingness to pay for each unit of the good, resulting in no consumer surplus. Therefore, choice A is correct. There is no allocative inefficiency or deadweight loss in this case since the monopolist is producing and selling the efficient quantity of the good to each consumer, given their individual willingness to pay. Profit is also higher for the monopolist practicing perfect price discrimination compared to the nondiscriminating monopolist, and total revenue is maximized.

When a Monopolist Practices Perfect Price Discrimination