12.2. Suppose a profit-maximizing monopolist producing Q units of output faces the demand curve P ! 20 " Q.

Its total cost when producing Q units of output is TC !

24 # Q2

. The fixed cost is sunk, and the marginal cost curve is MC ! 2Q.

a) If price discrimination is impossible, how large will the profit be? How large will the producer surplus be?

b) Suppose the firm can engage in perfect first-degree price discrimination. How large will the profit be? How large is the producer surplus?

c) How much extra surplus does the producer capture when it can engage in first-degree price discrimination instead of charging a uniform price?