Question

DO NOT HANDWRITE ANSWER. PLEASE TYPE AND DRAW GRAPH USING COMPUTER.

3. George has a monopoly on burrito sales in a small town in Kansas. The burritos cost him a constant $5 each to produce. He faces following demand schedule for his product:

Price	Quantity Demanded
$30	0
$25	1
$20	2
$15	3
$10	4
$5	5
$0	6

• Under normal monopoly conditions, how many burritos should he produce, what price should he charge, and how much profit can he expect to make?
  • Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus and deadweight loss.
• If George was able to engage in perfect price discrimination, how many burritos would he produce, what would his total revenue be, and how much profit would he earn?
  • Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus and deadweight loss.
• Is society better off by allowing George to perfectly price discriminate? Defend your answer.

Answer 1