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Question 1 Suppose that the small town of Moostissoostikwan, Manitoba has a single rm supplying electricity to N=10 identical consumers with individual demand given by
Question 1 Suppose that the small town of Moostissoostikwan, Manitoba has a single rm supplying electricity to N=10 identical consumers with individual demand given by p0) = 30 2y, where y is quantity demanded by a single consumer at price p02). Further, it is known that the rm has constant marginal cost MC = 5 and no xed cost. If the rm cannot price discriminate, a) Derive aggregate market demand P(Y), where Y is the quantity demanded by all consumers at price P. b) Set up the firm's profit function (clearly showing the first order condition) 7111'), nd prot- maximizing quantity I'M and price PM. Calculate fum's prots, consumer surplus and deadweight loss. Illustrate graphically. c) Suppose the rm decides to use two-part tariff as a means of increasing prots. Describe optimal two-part tariff pricing scheme, calculate total quantity produced by the rm, rm's prots, consumer surplus, and deadweight loss. d) Give the denition of perfect price discrimination. Calculate quantity produced and prots if the firm employs this pricing strategy. Compare your results to part (b). What do you notice
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