Suppose a Single Firm Has Constant Marginal Cost and Faced

question 8

Essay

Suppose a single firm has constant marginal cost and faced the demand curve
a.Illustrate in this graph how a monopolist who cannot price discriminate would price this good.What is the monopoly price and quantity?
b.Assuming no recurring fixed costs, how much profit does the monopolist make? How much consumer surplus is generated?
c.If the monopolist were able to first-degree price discriminate instead, how much would he produce? How much profit would he make? How much consumer surplus is generated?
d.Which outcome is more efficient and why?

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Definitions:

Contractual Rights

These are rights specifically granted to parties within a contract, allowing them to demand the performance of certain duties by others within the agreement.

Assignment

The transfer of rights under a contract to another party.

Negotiation

Direct communication between the parties to a dispute in an effort to resolve the problems without third-party intervention; transferring negotiable instruments to third parties.

Negotiable Instrument

A legal document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payee able to transfer it to another holder.