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Perfect price discrimination: 1. eliminates all consumer surplus. 2. maximizes producer surplus. 3. creates no deadweight...

Perfect price discrimination:

1. eliminates all consumer surplus.

2. maximizes producer surplus.

3. creates no deadweight loss.

4. All of these statements are true.

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Answer #1

Option 4.

  • Perfect price discrimination is also known as the first degree price discrimination and is the highest level of price discrimination.
  • The perfect price discrimination occurs when the firm charges maximum price for each unit of good it sells and charges maximum for those goods for which the consumer is willing to pay.
  • This allows the firms to gain the entire producer surplus while extracting the entire consumer surplus.
  • In this level of price discrimination, there is no deadweight loss.
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