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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
- 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 = 100 - Q.
The Supply curve for competitors is P = Q and the marginal cost curve for the monopolists is
MC = Q and TC = *Q2.
- Draw the Supply Curve (marginal cost curve) with an upward slope and put letters in for areas. For the three situations compare
- the price (or prices) charged consumers (6),
- the quantity sold (3),
- consumer surplus (6),
- producer surplus (6),
- total gains from trade (3).
- The size of the deadweight loss. (3)
- 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? (3)
Calculations and Graph Here:
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