In our discussion of Figure 12.4, we assumed that the monopoly engaged in block-pricing by setting both block prices so that they were on the demand curve. However, suppose the monopoly sets the first block at 20 units but can choose a first-block price that is greater than $70. It then allows consumers to buy as many additional units as they want at $30 per unit. Can the monopoly choose a price for the first block such that consumers are willing to buy 60 units, the monopoly captures the entire potential surplus, and society does not suffer a deadweight loss? If so, what is the first-block price?

Figure 12.4

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(a) Quantity Discrimination (b) Single-Price Monopoly 90 90 A%3D $200 70 E = $450 60 $200 50 F= $900 B= D= :$200 $1,200 G= $450 30 30 Demand Demand MR 20 40 90 30 90 Q, Units per day Q, Units per day price, $ per unit price, $ per unit