Suppose a market is monopolized. The monopolist faces a demand curve of the form P = 1,500 -3Q, and a total cost function of the form TC = 300Q. a)Suppose that the monopolist can only charge a single price in the market. Explain, showing relevant workings,why this price will be $900.

b) Now, suppose the monopolist could price discriminate using second degree price discrimination. Suggest a price discrimination scheme (consisting of twoprices and their corresponding quantities) that would increase the monopolist's profit compared to that available from charging the single-pricein part (a). You must prove, with relevant calculations of the profit under the single price versus your suggested two-price scheme, that the scheme you have suggested results in higher profit compared to the single price scheme in (a). (Note: you may choose any two prices, as long as they are consistent with the demand curve, and they satisfy the requirement to increase profit above that from the single-price monopoly.)

c)Draw one clearly labelled diagram to illustrate: i.The single price monopoly situationfrom (a), showing the price, quantity and profit area. ii.The two-price (price discrimination) monopoly situation from (b), showing the prices, quantities and profit areas.

d)Describe how your two-price system from part (b) affects the consumer surplus and the dead-weight loss occurring in the market. Illustrate these areas on your diagram from (c).