Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph showsthe market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Oohboots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that itsmarginal cost curve is also equal to the average total cost (ATC) curve.First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of theconsumer's willingness and ability to pay.On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamondsymbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade thedeadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero,indicate this by leaving that element in its original position on the palette.)10090Monopoly Outcome80A70Consumer Surplus6050MC ATC40Profit30Deadweight Loss10DemandMR040120160200240280320360400QUANTITY (Pairs of Ooh boots)8020PRICE (Dollars per pair of Ooh boots) profit, or deadweight loss equals zero, indicate this by leaving that element in its original poSition on the palette.)10090Monopoly Outcome70Profit60MC ATC40Consumer Surplus3020Deadweight Loss10Demand036004080120160200240280320400QUANTITY (Pairs of Ooh boots)Consider the welfare effects when the industry operates under a monopoly and cannot price discriminate versus when it can price discriminate.Complete the following table by indicating under which market conditions each of the statements is true. (Note: If the statement isn't true for eithersingle-price monopolies or perfect price discrimination, leave the entire row unchecked.) Check all that apply.Single-price MonopolyPerfect Price DiscriminationStatementThere is no deadweight loss associated with the profit-maximizing output.Total surplus is not maximized.Barefeet produces the efficient quantity of Ooh boots.8050PRICE (Dollars per pair of Ooh boots)

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Asked Nov 6, 2019
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Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows
the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Ooh
boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its
marginal cost curve is also equal to the average total cost (ATC) curve.
First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the
consumer's willingness and ability to pay.
On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond
symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the
deadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero,
indicate this by leaving that element in its original position on the palette.)
100
90
Monopoly Outcome
80
A
70
Consumer Surplus
60
50
MC ATC
40
Profit
30
Deadweight Loss
10
Demand
MR
0
40
120
160
200
240
280
320
360
400
QUANTITY (Pairs of Ooh boots)
80
20
PRICE (Dollars per pair of Ooh boots)
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Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $40 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) 100 90 Monopoly Outcome 80 A 70 Consumer Surplus 60 50 MC ATC 40 Profit 30 Deadweight Loss 10 Demand MR 0 40 120 160 200 240 280 320 360 400 QUANTITY (Pairs of Ooh boots) 80 20 PRICE (Dollars per pair of Ooh boots)

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profit, or deadweight loss equals zero, indicate this by leaving that element in its original poSition on the palette.)
100
90
Monopoly Outcome
70
Profit
60
MC ATC
40
Consumer Surplus
30
20
Deadweight Loss
10
Demand
0
360
0
40
80
120
160
200
240
280
320
400
QUANTITY (Pairs of Ooh boots)
Consider the welfare effects when the industry operates under a monopoly and cannot price discriminate versus when it can price discriminate.
Complete the following table by indicating under which market conditions each of the statements is true. (Note: If the statement isn't true for either
single-price monopolies or perfect price discrimination, leave the entire row unchecked.) Check all that apply.
Single-price Monopoly
Perfect Price Discrimination
Statement
There is no deadweight loss associated with the profit-maximizing output.
Total surplus is not maximized.
Barefeet produces the efficient quantity of Ooh boots.
80
50
PRICE (Dollars per pair of Ooh boots)
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profit, or deadweight loss equals zero, indicate this by leaving that element in its original poSition on the palette.) 100 90 Monopoly Outcome 70 Profit 60 MC ATC 40 Consumer Surplus 30 20 Deadweight Loss 10 Demand 0 360 0 40 80 120 160 200 240 280 320 400 QUANTITY (Pairs of Ooh boots) Consider the welfare effects when the industry operates under a monopoly and cannot price discriminate versus when it can price discriminate. Complete the following table by indicating under which market conditions each of the statements is true. (Note: If the statement isn't true for either single-price monopolies or perfect price discrimination, leave the entire row unchecked.) Check all that apply. Single-price Monopoly Perfect Price Discrimination Statement There is no deadweight loss associated with the profit-maximizing output. Total surplus is not maximized. Barefeet produces the efficient quantity of Ooh boots. 80 50 PRICE (Dollars per pair of Ooh boots)

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Expert Answer

Step 1

Under the monopoly market, the profit is maximized at where the marginal revenue is equal to the marginal cost. The monopoly output without price discrimination can be shown with the help of a figure as follows:

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100 A 90 70 В 50 MC ATC 40 G 20 10 MR Demand 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Pairs of Ooh boots) Figure 1 80 60 30 PRICE (Dollars per pair of Ooh boots)

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Step 2

In the figure, horizontal axis represents quantity and vertical axis represents price of the commodity. It is given that, MC is constant at $40. The monopoly will maximize the profit at MC=MR, where the corresponding quantity produced is 100 units at price $65. According to the figure, the consumer surplus is the area of triangle ABC, which shows the difference between highest willing price and the actual price that the consumer pays. The consumer surplus always lies above the equilibrium price and below the demand curve. Since the market is not attain equilibrium, it shows inefficient allocation, which is termed as the dead-weight loss. In the figure, deadweight loss is the area of triangle BDF and the total profit is the area of rectangle CBFG.

Step 3

When implement price discrimination, the monopolist charge each consumers a price equal to the consumer&r...

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100 90 80 70 60 50 MC ATC 40 C 30 20 Demand 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Pairs of Ooh boots) Figure 2 PRICE (Dollars per pair of Ooh boots)

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