a Draw the cost demand and marginal revenue curves for the mo nopolist Show the

# A draw the cost demand and marginal revenue curves

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(a) Draw the cost, demand, and marginal-revenue curves for the mo- nopolist. Show the price the monopolist would charge without price discrimination. See graph below. 6 (b) In your diagram, mark the area equal to the monopolist’s profit and call it X . Mark the area equal to consumer surplus and call it Y . mark the area equal to the deadweight loss and call it Z . See above. (c) Now suppose that the monopolist can perfectly price discriminate. What is the monopolist’s profit? (Give your answer in terms of X, Y, and Z ) If the monopolist can price discriminate, then it means it can charge a price exactly equal to each consumer’s willingness to pay . Therefore, the monopolist can capture all of the consumer surplus (which was the difference between consumer’s willingness to pay and the market price). So, monopolists profit is π = X + Y + Z (d) What is the change in the monopolist’s profit from price discrim- ination? What is the change in total surplus from price discrim- 7  5. Pete’s SunMoney is one firm of many in the market for coffee, which is in long-run equilibrium.  #### You've reached the end of your free preview.

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• Spring '08
• SamuelMendez
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