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

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

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of perfect price discrimination. It occurs when a monopolist charges each consumer the maximum price they are willing to pay, capturing all consumer surplus.
2. Step 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 matches the competitive level.
3. Step 3: Recognize that because the monopolist captures all consumer surplus, there is no consumer surplus left; it is fully converted into producer surplus.
4. Step 4: Note that deadweight loss, which arises from reduced output in a single-price monopoly, is eliminated under perfect price discrimination because output is not restricted.
5. Step 5: Understand that under perfect price discrimination, prices vary by consumer, so not all consumers pay the same price; each pays their individual maximum willingness to pay.