The perfect price-discriminating monopolist in this diagram will produce ____ units of output, and a single-price monopolist would produce _____ units of output. Consumer surplus under a perfectly price discriminating monopolist is _____ dollars than under a single-price monopolist. While, perfect price discrimination results in reduced consumer surplus, it (increases/decreases) producer surplus and ultimately results in deadweight loss that is (less than/greater than/equal to) the amount of deadweight loss found in a perfectly competitive market.
Homework Answers
1. Ans: 8
Explanation: Perfectly discriminating monopolist charges price on demand curve till it is above MC.
2. Ans: 4.
Explanation: Profits (with single price) are maximum at MR = MC point where units produced are 4.
3. Ans: 8.
Explanation: Consumer surplus with perfect discrimination = 0. Consumer surplus with single price outcome = 0.5(10 - 6)(4) = 8
4. Ans: increases.
Explanation: Profits are more with perfect discrimination.
5. Ans: equal.
Explanation: There is deadweight loss in perfect discrimination as whole consumer surplus goes to producer with last price charged at MC.
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