1. Consider a monopolist with cost function C(q) = 20q + 700 facing demand given by q = 200-5p, where p is the price of the good. a) Suppose the firm charges every consumer the same price. Show that the firm will not find it profitable to operate b) Suppose the firm is able to carry out perfect price discrimination. Will the firm operate in this case? What is the firm's profit equal to? c) Calculate the efficiency loss of the "single-price" monopoly outcome in part (a)
1. Consider a monopolist with cost function C(q) = 20q + 700 facing demand given by q = 200-5p, where p is the price of the good. a) Suppose the firm charges every consumer the same price. Show that the firm will not find it profitable to operate b) Suppose the firm is able to carry out perfect price discrimination. Will the firm operate in this case? What is the firm's profit equal to? c) Calculate the efficiency loss of the "single-price" monopoly outcome in part (a)
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.5P
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