AP Microeconomics Flashcards: Price Discrimination
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Review key ideas with interactive flashcards. This set includes 10 cards to help you master important concepts.
A firm with market power wants to increase its profit. What strategy can it use to capture consumer surplus?
Under certain conditions, the firm can engage in price discrimination to capture additional consumer surplus and increase its profits.
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A firm with market power wants to increase its profit. What strategy can it use to capture consumer surplus?
Under certain conditions, the firm can engage in price discrimination to capture additional consumer surplus and increase its profits.
In a graph of a perfectly price-discriminating monopolist, what happens to the area of consumer surplus?
The area of consumer surplus is completely captured by the monopolist as profit, along with the traditional producer surplus.
What is price discrimination?
Price discrimination is a strategy used by a firm with market power to increase its profits by charging different prices to different consumers for the same product.
What happens to consumer surplus under perfect price discrimination?
Under perfect price discrimination, the monopolist extracts all economic surplus, meaning consumer surplus is completely eliminated and converted into producer surplus (profit).
What condition must be met for a firm to be able to engage in price discrimination?
A firm must have market power to be able to engage in price discrimination.
How does a perfectly price-discriminating monopolist determine its output level?
It produces the quantity where the price of the last unit sold equals the marginal cost (P=MC).
How does perfect price discrimination affect deadweight loss?
Perfect price discrimination eliminates all deadweight loss because the firm produces the allocatively efficient quantity where price equals marginal cost.
Define perfect price discrimination.
Perfect price discrimination occurs when a monopolist charges each consumer the maximum price they are willing to pay, thereby extracting all economic surplus.
What is the primary goal of a firm that engages in price discrimination?
The primary goal is to increase its profits by capturing additional consumer surplus from buyers.
How does the output quantity of a perfectly price-discriminating monopolist compare to a competitive market?
A perfectly price-discriminating monopolist produces the quantity where price equals marginal cost, which is the same output level as a competitive market.