If a monopolist is able to perfectly price discriminate, which of the following outcomes will occur?

• A. Deadweight loss will increase.
• B. Total surplus will be less than under single-price monopoly.
• C. Producer surplus will decrease.
• D. Consumer surplus will be zero.

Answer: (D)

Verified step by step guidance

1. Understand the concept of perfect price discrimination: it means the monopolist charges each consumer their maximum willingness to pay, capturing all consumer surplus.
2. Recall that under perfect price discrimination, the monopolist sells to every consumer whose willingness to pay is at least equal to the marginal cost, so output is efficient and deadweight loss is eliminated.
3. Analyze the impact on total surplus: since output is efficient, total surplus is maximized and is greater than or equal to that under a single-price monopoly.
4. Consider the distribution of surplus: the monopolist captures all the consumer surplus, turning it into producer surplus, so consumer surplus becomes zero.
5. Conclude that producer surplus increases, consumer surplus is zero, deadweight loss is eliminated, and total surplus is maximized under perfect price discrimination.