Econs.101.Sp.06.quiz2solutions

Econs.101.Sp.06.quiz2solutions - Professor Schuler...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Professor Schuler Economics 101 Spring 2006 Quiz 2 Solutions a. This situation describes a monopoly, see Figure 1. The equilibrium industry output and price are given by Q m and P m , respectively. The supplier’s profit is the region given by BDGH. The consumer surplus (CS) is the region given by ABH and producer surplus (PS) is the region given by BEFH. The deadweight loss is the region given by BCE. The total welfare of the economy is the sum of CS and PS. Figure 1: Part a 1 Professor Schuler Economics 101 Spring 2006 b. This situation describes third degree price discrimination, see Figure 2. This pricing policy differs from (a) because in here the monopolist is able to charge two different prices, one to each type of consumer. In (a), the monopolist had to charge the same price to all consumers. Third degree price discrimination is very beneficial to the supplier since it is able to shift even more welfare than in (a) away from consumer surplus to the supplier’s profit (i.e. surplus). Of course, this is assuming the optimal prices the monopolist would want to charge...
View Full Document

Page1 / 5

Econs.101.Sp.06.quiz2solutions - Professor Schuler...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online