1. Compare a situation of market competition, monopoly, and monopoly with first-degree price discrimination on a single graph. Assume that the firms are maximizing profits. Assume that the supply curve for the competitors is the same as the marginal cost curve for the monopoly situations.

The demand curve is

P = 200 - Q.

The Supply curve for competitors is P =2 Q and the marginal cost (MC) curve for the monopolists is MC = 2Q. The total cost (TC) function is TC = Q² .

Draw the Supply Curve (marginal cost curve) with an upward slope and put letters in for areas. For the three situations compare:

i. the price (or prices) charged consumers

ii. the quantity sold

iii. consumer surplus, iv. producer surplus

v. total gains from trade

vi. The size of the deadweight loss

vii. When comparing the single-price monopoly to the first-degree price discriminator, are there any consumers who are better off from the switch to first-degree price discrimination?

Fill in the grid below and then answer question vii using sentences.

Competition Single Price Monopoly First-Degree Price Discrimination

i. Price (or Prices)

ii. Quantity Sold

iii. Consumer Surplus

iv. Producer Surplus

v. Total Gains from Trade

vi. Deadweight Loss

vii. Which consumers, if any, are better off under First-Degree Price Discrimination than under the Single Price Monopoly?