1. You decide to begin selling widgets. You know that the demand for widgets is given by P = 40 – 0.5Q and that you face increasing marginal costs, where MC = 7+ 0.1Q. a. When you begin selling, you cannot price discriminate. What is your profit maximizing price and output? b. At the profit maximizing price and output, calculate consumer surplus, producer surplus, and deadweight loss (if any). c. Assume you become a good enough sales person to perfectly price discriminate. What will be the new level of output? d. At this new level of output, calculate consumer surplus, producer surplus, and deadweight loss (if any).

1. You decide to begin selling widgets. You know that the demand for widgets is given by P = 40 – 0.5Q and that you face increasing marginal costs, where MC = 7+ 0.1Q. a. When you begin selling, you cannot price discriminate. What is your profit maximizing price and output? b. At the profit maximizing price and output, calculate consumer surplus, producer surplus, and deadweight loss (if any). c. Assume you become a good enough sales person to perfectly price discriminate. What will be the new level of output? d. At this new level of output, calculate consumer surplus, producer surplus, and deadweight loss (if any).

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 10PA

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