Imagine that you arrive at an economics experiment with six other people and are told that you
Question:
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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