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In the secluded town of Reitsville, a real estate consulting rm called Top Realty provides land dcvelopers with advice and guidance for large scale connnercial
In the secluded town of Reitsville, a real estate consulting rm called Top Realty provides land dcvelopers with advice and guidance for large scale connnercial development projects. They are the only rm that provides this service in Reitsville, giving them a monopoly on the market. Top Realty charges each of its clients the same, xed rate for its services. Students should asstune a horizontal marginal cost line for the purpose of answering this question. [a] Draw the marginal oost, demand and marginal revenue curves for the monopolist. Show the price Top Realty would charge to its clients and the quantityr it produces. (5:11am) [b] In your diagram from part {a}, mark the area equal to Top Realty's prot and label it a. Mark the area equal to oonsumer surplus and label it B. Mark the area equal to the deadweight loss and label it C. What is total surplus equal to? [State your answer in terms of areas A, B, and (2.} (smash) {c} Now suppose that Top Realty can perfectly price discriminate. They achieve this pricing their services based on the exact needs of the client, so each client receives a different price. What quantity will they produce? What is Top Realty's prot? {State your answer in terms of areas A, B, and C.) {4 marks) {d} What is the change in the Top Realty's prot from price discrimination? What is the change in total surplus from price discrimination? Which change is larger? Explain. [State your answers in terms of areas A, B, and C.) (.5 marks)
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