Which of the following is a result of perfect price discrimination?

• A. Each consumer pays the same price for the good.
• B. Total surplus is lower than under perfect competition.
• C. Deadweight loss increases compared to single-price monopoly.
• D. All consumer surplus is captured by the producer.

Answer: (D)

Verified step by step guidance

1. Understand the concept of perfect price discrimination: it occurs when a seller charges each consumer the maximum price they are willing to pay, capturing all consumer surplus.
2. Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay; under perfect price discrimination, this surplus is eliminated because the producer captures it all.
3. Analyze the effects on total surplus: since the producer captures all consumer surplus and sells to all consumers willing to pay at least the marginal cost, total surplus is maximized and deadweight loss is eliminated.
4. Compare this to a single-price monopoly, where the producer charges one price, leading to some consumers not buying and creating deadweight loss; perfect price discrimination removes this inefficiency.
5. Conclude that the key result of perfect price discrimination is that all consumer surplus is captured by the producer, while total surplus is maximized and deadweight loss is zero.