Suppose a monopolist has zero marginal cost and faces the following demand curve
D(p) = 10 - 2p
(a) Graph the demand curve, the marginal revenue curve, and the rm's marginal cost curve. Calculate the monopolist's price and output if she cannot engage in any type of price discrimination. Calculate the monopolist's pro ts at this price. Is the market operating eciently? Explain. In a general equilibrium context, explain the e ects of the monopolist on the allocation of goods and the use of resources in the economy.
(b) Suppose the monopolist can perfectly price discriminate. What prices will she charge?
Calculate the monopolist's pro ts under this pricing scheme. Is the market operating efficiently? Explain. Explain the diculty in engaging in this type of discrimination in terms of the revelation problem discussed in class.
(c) Suppose the demand curve represents that of a single consumer. If the monopolist engaged used a two-part tari to price its goods. Calculate the two-part tari (entry fee and per unit price) and the monopolist's pro ts. Compare and contrast this case with the perfect price discrimination case above.
(d) Suppose the monopolist used an all-or-nothing pricing scheme. Calculate the all-or-nothing price and the monopolist's pro ts. Compare and contrast this case with the perfect price discrimination case above.
(e) Given the information problems facing the monopolist, which of the later two cases would be easier to implement. Discuss the types of information that may be needed to implement each.