sec_10 - PAM 2000: Section Handout 10 (Based on Chapters 12...

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PAM 2000: Section Handout 10 (Based on TA : Romita Mukherjee April 28, 2009 1 Price Discriminating Monopoly (1) Explain why a firm can earn more profit by price discrimination than from setting a uniform price. (2) Suppose two countries, A and B, are at war with each other. Country A is very wealthy; country B is very poor. The XYZ Company produces tanks. Is XYZ able to set a different price for the tank sold to country A than the price for the tank sold to country B? Explain. 2 Perfect Price Discrimination (1) True or False? Explain. A perfect-price-discriminating monopoly max- imizes social welfare as measured by the sum of producer surplus plus consumer surplus. (2) Explain whether consumers prefer a single price monopoly or a perfectly price discriminating monopoly. 1
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(3) Bob is the only carpet installer in a small isolated town. The above figure shows the demand curves of two distinct groups of customers-residential and business. If the marginal cost of installing carpet is a constant $1
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sec_10 - PAM 2000: Section Handout 10 (Based on Chapters 12...

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