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Price Discrimination -- Practice Problem Consider the following market demand schedule for apples. Assume that there are no fixed costs and that marginal cost is

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Price Discrimination -- Practice Problem

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Consider the following market demand schedule for apples. Assume that there are no fixed costs and that marginal cost is constant at $4 per unit for all firms in this industry. The corresponding demand curve for this market is shown in the accompanying graph. Price Quantity Demanded Price Apples $12 0 12 -i-. 11 100 11 10 200 10 9 300 8 400 7 500 6 600 5 700 800 900 WA -NWA 1000 1100 - N Market Demand 0 1200 200 400 600 800 1000 1200 Quantity Based on the above information, which of the following statements is(are) TRUE? I. If this market was perfectly competitive then each profit maximizing firm will charge exactly the same price and total output in this market would be equal to 800 units. Il. If a single-price, profit maximizing monopolist existed in this market then 400 units of output will be produced and the price will be $4 per unit. Ill. If a monopolist was successfully able to perfectly price discriminate in this market then the profit maximizing level of output would be 1,200 units

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