Question

Evaluate the validity of each of the following statements. Be sure to clearly accompany your explanation...

Evaluate the validity of each of the following statements.

Be sure to clearly accompany your explanation using graphs and equations where appropriate.

b) If a monopolist can perfectly price discriminate, then society should allow the monopolist to do so since there will not be any negative efficiency implications.

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Answer #1

If a monopolist can perfectly price discriminate, then it will lead to an efficient outcome, in the sense, there will be no deadweight loss. Thus, all the surplus will be producer surplus. So, if we just care about efficiency, then we may consider it a viable market structure. But since there is no consumer surplus, there is no benefit for the customers. So, it is basically bad for the consumers and thus such a market structure is not desirable for a society.

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