Suppose the monopolist in Problem 12.6 incurs a marginal cost of 5.50 euros for every unit it produces. The firm has no fixed costs.
a) How many units will it produce if it wants to maximize its profit? (Remember, it must produce whole units.)
b) What will its profit be when it maximizes profit?
c) What will the deadweight loss be when it maximizes profit? Explain.
Problem 12.6
Suppose a monopolist is able to engage in perfect first-degree price discrimination in a market. It can sell the first unit at a price of 10 euros, the second at a price of 9 euros, the third at a price of 8 euros, the fourth at a price of 7 euros, the fifth at a price of 6 euros, and the sixth at a price of 5 euros. It must sell whole units, not fractions of units.
a) What is the firm's total revenue when it produces two units?
b) What is the total revenue when it produces three units?
c) What is the relationship between the price of the third unit and the marginal revenue of the third unit? d) What is the relationship between the price and the marginal revenue of the fourth unit?