In theory, perfect price discrimination
A)decreases the monopolist's profits.
B)decreases consumer surplus.
C)increases deadweight loss.
D)reduces the number of consumers who purchase the monopoly's product.

Question

Quizplus · Accepted Answer

Perfect price discrimination allows the monopoly to extract the entire consumer surplus, leaving consumers with no surplus. This will decrease consumer surplus. However, the monopoly will capture all of the surplus as profit, which will increase its profits. As a result, there will be no deadweight loss since the firm has captured all available surplus. Additionally, there is no reduction in the number of consumers who purchase the product since the monopoly is able to charge each consumer their maximum willingness to pay.

In Theory, Perfect Price Discrimination