1. Let the inverse demand curve for a monopolist's product be P = 100 – 2Q and the cost of production are C = 10Q.
a. Find the optimal price and output if the monopolist uses a uniform pricing strategy. Compute the consumer surplus, the firm’s profits and the deadweight loss to society in this case.
b. Describe the optimal first degree price discrimination strategy. Compute the consumer surplus, the firm’s profits and the deadweight loss to society if this monopolist engages in first-degree price discrimination.
c. Find the optimal second degree price discrimination strategy with two blocks. In other words, what choices of P1, Q1 for the first block and P2, Q2 for the second block will maximize profit? Compute the consumer surplus, the firm’s profits, and the deadweight loss to society under this optimal two-block tariff.
d. Find the optimal two-part tariff strategy and the profits under pricing strategy? How much extra profits the store earns using this two-part pricing strategy compared with using the standard monopoly’s practice of charging a consumer just a per unit price.