A monopolist that practices perfect price discrimination
A)creates no deadweight loss.
B)charges one group of buyers a higher price than another group, such as offering a student discount.
C)produces the same monopoly level of output as when a single price is charged.
D)charges some customers a price below marginal cost because costs are covered by the high-priced buyers.

Question

Quizplus · Accepted Answer

A monopolist that practices perfect price discrimination charges each customer the maximum price they are willing to pay, which eliminates any deadweight loss. This occurs because the monopolist can capture all of the consumer surplus and turn it into additional profit, without reducing output or imposing any inefficient price distortions. Therefore, there is no need to charge some customers a price below marginal cost or offer discounts to certain groups of buyers.

A Monopolist That Practices Perfect Price Discrimination