Which of the follow statements about price discrimination is not true ?
Correct answer: A. Perfect price discrimination generates a deadweight loss
- A. Perfect price discrimination generates a deadweight loss
- B. Price discrimination can raise economic welfare.
- C. price discrimination requires that seller be able to separate buyers according to their willingness to pay.
- D. Price discrimination increases a monopolist's profits.
- E. For a monopolist to engage in price discrimination buyers must be unable to engage in arbitrage.
Explanation
Perfect price discrimination eliminates deadweight loss by allowing the monopolist to sell every unit for which willingness to pay covers marginal cost, although it transfers the surplus to the seller. The other statements describe conditions or possible effects of price discrimination.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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