7. Price dlitl'l'llal'l II'Id WEII'IPI Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $30 per pair of Doh boots. For simplicity, assume that fixed costs are equal in zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (AT-C) curve. First, suppose that Bare'Feet cannot price discriminate. That is, it must charge each consumer the same price For Ooh boots regardless of the consumer's willingness and ability to pay. an the following graph, use the black paint (plus symbol) to indicate the prot-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the prot, the green points {triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market without prise disa'imination. (Note: If you decide that consumer surplus, prot, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) 100 90 Monopoly Outcome 70 A GO Consumer Surplus 50 O PRICE (Dollars per pair of Ooh boots) 40 Profit MC = ATC 30 20 Deadweight Loss 10 MR Demand 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Pairs of Ooh boots) Now, suppose that Barefeet can practice perfect price discrimination-that is, it knows each consumer's willingness to pay for each pair of Ooh boots and is able to charge each consumer that amount.On the following graph, use the black point (plus symbol) to indicate the profit-maximizing quantity sold and the lowest price at which the firm sells its boots. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market with perfect price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) 100 90 Monopoly Outcome 80 70 60 Profit 50 A PRICE (Dollars per pair of Ooh boots) 40 Consumer Surplus MC = ATC 30 20 Deadweight Loss 10 Demand 0 40 80 120 160 200 240 280 3 360 400 QUANTITY (Pairs of Ooh boots)Complete the following table by indicating under which market conditions each of the statements is true. (Note: If the statement isn't true for either single-price monopolies or perfect price discrimination, leave the entire row unchecked. ) Check all that apply. Statement Single-price Monopoly Perfect Price Discrimination Barefeet produces the efficient quantity of Ooh boots. O O There is no deadweight loss associated with the profit-maximizing output. Total surplus is not maximized. O O6. Examples of price discrimination Complete the following table by indicating whether or not each scenario is an example of price discrimination. Hint: To determine whether a scenario is an example of price discrimination, think about whether the market can be segmented into two groups that pay different prices for the same good. Price Discrimination Scenario Yes No Horizon Wireless offers various features "a la carte" that a customer may add to his or her calling plan, such as a text O O messaging package, a data package, and an Internet package. Last-minute "rush" tickets can be purchased for most Broadway theater shows at a discounted price. They are typically distributed via lottery or on a first-come, first-served basis a few hours before the show. Assume that the theater in question O O does not hold seats in reserve for this purpose, but rather offers rush tickets only for seats not sold before the day of the performance.1|}. Public policy toward monopolies Suppose that a government that is skeptical of efforts to regulate prices charged by private companies is nevertheless concerned that an electric utility company is taking advantage of consumers with unfair pricing policies. which of the following policy options might most effectively enable the government to achieve its objectives in this situation? Q Do nothing at all. 0 Turn the company into a public enterprise. C) Regulate the rm's pricing behavior. 0 Use antitrust iaws to increase competition