2.4 To promote her platinum-selling CD Feels Like Home in 2005, singer Norah Jones toured the country giving live performances. However, she sold an average of only two-thirds of the tickets available for each show, T* (Robert Levine, “The Trick of Making a Hot Ticket Pay,” New York Times, June 6, 2005, C1, C4). Suppose that the local promoter is the monopoly provider of each concert. Each concert hall has a fixed number of seats.

a. Assume that the promoter’s cost is independent of the number of people who attend the concert

(Ms. Jones received a guaranteed payment).

Graph the promoter’s marginal cost curve for the concert hall, where the number of tickets sold is on the horizontal axis. Be sure to show T*.

b. If the monopoly can charge a single market price, does the concert’s failure to sell out prove that the monopoly set too high a price? Explain.

c. Would your answer in part b be the same if the monopoly can perfectly price discriminate? Use a graph to explain.

• 2.5 A firm is a natural monopoly (see Chapter 11).

Its marginal cost curve is flat, and its average cost curve is downward sloping (because it has a fixed cost). The firm can perfectly price discriminate.

Use a graph to show how much the monopoly produces, Q*. Show graphically and mathematically that a monopoly might shut down if it can only set a single price but operate if it can perfectly price discriminate. m 3. group Discrimination