Question

If a monopoly engages in first-degree price discrimination?

a-deadweight loss is maximized

b-consumer surplus is maximized

c-social surplus is maximized

d-producer surplus is minimized

Answer 1

c-social surplus is maximized.

Explanation:

Price discrimination is the process of charging different prices to different consumers for the same good. When it practices price discrimination, it produce where price equals MC. So it is allocatively efficient. And it reduced deadweight loss to zero because, now it is not producing lower quantity to maximise its profit.

Consumer surplus will be also zero. Because, firm will charge according to their willingness to pay for each costumers.

Producer surplus is maximized because all surplus of consumers will be now of producer.