A firm with market power faces an inverse demand curve of P = 100 – 10Q....

A firm with market power faces an inverse demand curve of P = 100 – 10Q. Assume that the firm faces a marginal cost curve of MC = 10 + 10Q.

(4)a. If the firm cannot price discriminate, what are the profit maximizing levels of output and price?

(4)b. Given you answers in part “a,” what are the values of consumer surplus, producer surplus and deadweight welfare loss?

(4)c. If the firm is able to practice first degree (perfect) price discrimination, what is the firm’s output level?

(4)d. If the firm is able to practice first degree price discrimination, what are the levels of consumer and producer surplus and deadweight welfare loss?

Expert Solution

Rahul Sunny answered 7 months ago

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