First degree price
discrimination is also called perfect price discrimination. It is done
by ''charging along the MV curve.' That is,
each buyer is charged at the maximum amount that they are willing to
pay. Accordingly, all consumer surplus will be captured!
Output
determination
Again, a monopolist
will produce until MR = MC, provided that AR >=AC.
Note: In maximizing
wealth, a monopolist produces at MR=MC. Since the monopolist charges
the buyers at their MV, MR will equal MV. As a result, a monopolist
who produces at MR=MC will result in MV=MC. Production under perfect
price discrimination is therefore efficient! (Click
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