90.2K

Verified Solution

Link Copied!

Suppose Clomper's is a monopolist that manufactures and sells Stompers, an extremely trendy shoe brand with no close substitutes. The foliowing graph shows the market demand and marginal revenue (MR) curves Clomper's faces, as welt as its marginal cost (MC), which is constant at $30 per pair of Stompers. For simplicty, assume that foed costs are equal to zero; this, combined whth the fact that Clomper's marginal cost is constant, means that iss marginal cost curve is also equal to the average total cost (ATC) ourve. First, suppose that Clomper's cannot price discriminate. That is, it must charge each consumer the same price for Stompers regardiess of the consumer's willingness and absty to pary. On the following graph, use the black point (olus symbou) to indicate the profic-maximiring price and qusntity, Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surphus, and the black points ( ius symbol) to shade the deadiveight loss in this market without price discrimination. (Note If vou decide that consumer surplus, prant, or deachweight iloss equals zero, indicate this by leaving that element in its anginal position on the polette.) On the following graph, use the black point (plus symbol) to indicate the profit-maximizing quantity sold and the lowest price at which the firm seils its boots. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surpius, and the biack points (plus symbol) to shade the deadweight loss in this market with perfect price discrimination. (Note: If you decide that consumer surplis, profit, or deadweight loss equals zero, indicate this by leaving that element in its oniginat position on the palette.) 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

Answer & Explanation Solved by verified expert

See Answer