Question

A monopolist is considering third degree price discrimination. It estimates that the inverse demand curves of its two potential market segments are:

Segment A: P ( Q A ) = 360 − 10 Q A

Segment B: P ( Q B ) = 180 − 5 Q B

The firm operates a single plant. Assuming fixed costs are negligible, its costs are such that:

A T C = M C = 10.

If the monopolist is able to price discriminate, what will be the equilibrium price and quantity for each market segment? What is the deadweight loss for each market segment?

Segment A Price:

Segment A Quantity:

Segment A Deadweight Loss:

Segment B Price:

Segment B Quantity:

Segment B Deadweight Loss

If the monopolist is unable to price discriminate, what will be the equilibrium price and quantity? What is the deadweight loss?

Market Price:

Market Quantity:

Market Deadweight Loss:

Is the deadweight loss under the discriminating monopolist more than, less than, or the same, as the deadweight loss under the non-discriminating monopolist?  

Answer 1