The market contains 100 consumers, each of whom only desire one unit of the good. Half these consumers have a valuation equal to VH. The other half have a valuation equation to VL such that VH > VL. The monopolist in the market has a unit cost of zero for the first 75 units, and c > 0 for all units thereafter. It turns out that VH > c > VL.

1. In a diagram, draw the demand curve.

2. In the same diagram, show the marginal revenue curve. This is tricky in the region where quantity goes from 49 to 51, so it might help to experiment by letting VH = 10 and VL = 5 at first.

3. In a diagram, draw the marginal cost curve.

4. If VH = 10, VL = 5 and c = 6 what is the monopoly price?

5. (Challenge Question) Provide general conditions on VH, VL and c such that there is no monopoly distortion in this market.