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In: Economics

Suppose the inverse demand for a product produced by a single firm is given by P...

Suppose the inverse demand for a product produced by a single firm is given by P = 200 − 5Q and this firm has a marginal cost of production of MC = 20 + 2Q.

a. If the firm cannot price-discriminate, what is the profit-maximizing price and level of output for this monopolist? What are the levels of producer and consumer surplus in the market? What is the deadweight loss?

b. If the monopolist can practice perfect price discrimination, what output level will it choose? What are the levels of producer and consumer surplus and deadweight loss under perfect price discrimination?

c. Suppose that the monopolist’s marginal cost curve is now MC = 20. If the monopolist cannot perfectly price discriminate but can distinguish between students (with a demand curve of P = 100 − 10Q) and non-students (with a demand curve of P = 300 − 10Q), what will be the price it is charging to students and non-students? What will be the quantity it is selling to students and non-students?

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Expert Solution

Rahul Sunny answered 2 years ago
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