Under perfect price discrimination _____. a) consumer surplus is zero b) consumer surplus is maximized c) consumer surplus is a constant no matter what price is charged d) consumer surplus rises as price is lowered

Perfect price discrimination is a pricing strategy where sellers charge each buyer the highest price they are willing to pay for each unit of a good. In other words, each consumer is charged the amount that they value the product, capturing all the consumer surplus as producer surplus.

Now that we understand what perfect price discrimination is, let's evaluate each statement in the exercise: a) Consumer surplus is zero: This statement would be true if, under perfect price discrimination, all consumer surplus is captured by the seller as producer surplus. b) Consumer surplus is maximized: This statement would be true if perfect price discrimination leads to the largest possible consumer surplus. c) Consumer surplus is constant, no matter the price charged: This statement would be true if perfect price discrimination has no effect on consumers' valuation of a product. d) Consumer surplus rises as the price is lowered: This statement would be true if lowering the price under perfect price discrimination increases consumer surplus.

The correct statement is (a) consumer surplus is zero. In a perfectly price-discriminating market, the producer charges each consumer the highest price they are willing to pay, which effectively captures all the consumer surplus as producer surplus. As a result, there is no consumer surplus left in the market, making the consumer surplus zero.

Let's briefly explain why the other statements are incorrect: b) Consumer surplus is maximized: This is incorrect because perfect price discrimination results in the producer capturing all the consumer surplus, leaving none for consumers. so the consumer surplus is not maximized. c) Consumer surplus is constant: This statement is also incorrect, as perfect price discrimination depends on how much consumers value the product. Moreover, perfect price discrimination leads to zero consumer surplus, meaning that consumer surplus is not constant in such markets. d) Consumer surplus rises as the price is lowered: This statement is not true in a perfectly price-discriminating market, as the producer already captures all the consumer surplus—leaving none for consumers—as the price that consumers are willing to pay for each unit is charged.