When a firm practices perfect price discrimination, it A. charges each consumer her reservation price. B. captures all the social gain. C. takes all consumer surplus from consumers. D. produces the same quantity as would be produced by a competitive market. E. All of the above are true.

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17 January, 13:57

When a firm practices perfect price discrimination, it A. charges each consumer her reservation price. B. captures all the social gain. C. takes all consumer surplus from consumers. D. produces the same quantity as would be produced by a competitive market. E. All of the above are true.

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Kenny Vega · Answer 1

Option E All the statements are correct.

Explanation:

The reason is that the company which practices perfect price discrimination is the one which is charging different to different customers. So the prcie that the firm charges the price that the customer is willing to pay. This is very common in markets the seller present a number of products and quotes a higher price and then have a healthy conversation with you and then agrees the price. Some people agree at the spot and some agree by heavy debate and forces the seller to reduce the cost otherwise the customer is going away. So this means the company is charging reservation price, takes all the consumer surplus from consumer and captures the social gain which is the maximum gain possible to extract from the person.

Due to charging different prices to different customers the production is almost average and this constitutes to the quantity that it would had produced if it was operating in the competitive market.

So all the answer are correct here.