1. Suppose that XChem, our hypothetical pharmaceutical company, can perfectly price discriminate when selling its weight-loss drug Eat-it-all. Assume inverse demand is given by  = 50 − 0.5, and that MC=$5 per dose.

a. Describe what it means for a firm to perfectly price discriminate and what must be true for this to occur.

b. What quantity of Eat-it-all will XChem produce? How does this compare to the amount they would produce if they could not price discriminate? How does this compare to the amount they would produce if they were forced to charge a price equal to marginal cost?

c. Compare the consumer surplus, producer surplus, and deadweight loss under perfect price discrimination to their amounts under single-price monopoly and perfect competition.

Answer rating: 100% (QA)

1 Perfect price discrimination occurs when a firm is able to charge each consumer the maxim... View the full answer