A firm with market power faces an inverse demand curve of P =100 – 10Q. Assume that the firm faces a marginal cost curve of MC =10 + 10Q.
(4)a. If the firm cannot price discriminate, what are the profitmaximizing levels of output and price?
(4)b. Given you answers in part “a,†what are the values ofconsumer surplus, producer surplus and deadweight welfare loss?
(4)c. If the firm is able to practice first degree (perfect)price discrimination, what is the firm’s output level?
(4)d. If the firm is able to practice first degree pricediscrimination, what are the levels of consumer and producersurplus and deadweight welfare loss?
