# Imagine that you arrive at an economics experiment with six

Imagine that you arrive at an economics experiment with six other people and are told that you will simulate a market. You will be the only seller. The other five people will be assigned a dollar value that they will receive if they buy the good for any amount of money (so if a person's value is \$6, he will buy the good for any price less than six dollars and will be happy). You are also given the following demand curve, and told that it represents the values that the "buyers" are assigned:

a. If you are told that you can produce as many units as you like at a cost of \$2 per unit, what would your marginal cost curve look like? Add the marginal cost curve that you face as the monopolist to the graph.
b. Draw the marginal revenue curve that you face as the monopolist, based on the demand curve given above.
c. What price would you set and what quantity would you produce if you have to post one price at which everyone can purchase the good?
d. Based on the price and quantity you selected in part c, what would consumer surplus be? What would producer surplus be? Is there a deadweight loss?
e. Imagine that you are told that now you can have a discussion with each buyer privately to negotiate a price. Would you still charge everyone the same price? Explain your answer.
f. Calculate the surplus and the deadweight loss for a scenario with perfect price discrimination.

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