pm4 - d Now assume that this firm engages in perfect price...

This preview shows pages 1–2. Sign up to view the full content.

Additional Problem 4 : Pure Monopoly vs Perfect Price Discriminating Monopoly 1. Given the following output (Q), price = average revenue (P=AR), and total cost (TC) data facing a firm, complete the questions that follow. Q P=AR TC 0 \$34 \$20 1 32 36 2 30 46 3 28 50 4 26 54 5 24 56 6 22 68 7 20 80 8 18 100 a) Is the market structure here perfect or imperfect competition? . Explain your reasoning for this answer below. Is the firm operating in the short run or long run? . Give two reasons for this conclusion. b) What is the equilibrium output for this firm? . What is the equilibrium price for this firm? . Confirm your answer by both the total and marginal approaches. Offer a brief explanation of the equilibrium conditions for both approaches. Use the space provided below for these explanations. c) Graph the equilibrium solution you found in part (b) for both the total and marginal approaches in the space below. Be sure to completely label all axes and relationships.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: d) Now, assume that this firm engages in perfect price discrimination and sells each unit of its product at a price equal to the maximum price the buyer of that unit of the product would be willing to pay. Complete the table below by computing total revenue and marginal revenue for the firm. Q P=AR TC 0 \$34 \$20 1 32 36 2 30 46 3 28 50 4 26 54 5 24 56 6 22 68 7 20 80 8 18 100 e) What is the marginal revenue that the firm (acting as a perfect price discriminator) obtains from the sale of each additional unit? Show this above in the space provided . f) At the profit maximizing level of output, how many units will the perfectly price discriminating firm sell? . What are the total economic profits for this firm? . g) Compare the economic effects of price discrimination to no price discrimination for the firm in terms of profits, price, and output graphically in the space below....
View Full Document

This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

Page1 / 2

pm4 - d Now assume that this firm engages in perfect price...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online