Now, suppose that Barefeet can practice perfect price discrimination-that is, it knows each consumer's willingness to pay for each pair of Ooh bootsand is able to charge each consumer that amount.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 sells itsboots. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and theblack points (plus symbol) to shade the deadweight loss in this market with perfect price discrimination. (Note: If you decide that consumer surplus,profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.)(?)100'+90Monopoly OutcomeProfConsumer SurplusDeadweight LossDeman80240 320 400 450 500 540 720 300QUANTITY (Pairs of Ooh boots)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 eithersingle-price monopolies or perfect price discrimination, leave the entire row unchecked.) Check all that apply.StatementSingle-price Monopoly Perfect Price DiscriminationOThere is deadweight loss associated with the profit-maximizing output.OBarefeet produces the efficient quantity of Och bootsOTotal surplus is maximized.OOR10MC-ATC 7. Price discrimination and welfareSuppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph showsthe market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $30 per pair of Oohboots. For simplicity, assume that foxed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that itsmarginal cost curve is also equal to the average total cost (ATC) curve.First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of theconsumer's willingness and ability to pay.On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamondsymbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade thedeadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero,indicate this by leaving that element in its original position on the palette.)?+Monopoly OutcomeConsumer SurplusDeadweight LossPRICE (Dollars per pair of Ooh boots)88228 2288 20MRQUANTITY (Pairs of Ooh boots)MC-ATCDemand500 640 720 800

In monopolistic market, a single firm produces unique good.

7. Price discrimination and welfare Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $30 per pair of Ooh boots. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) ? + Monopoly Outcome A Consumer Surplus Deadweight Loss 8822 8 PRICE (Dolars per pair of Ooh boots) 888 8 10 0 MC-ATC MR Demand 240 320 400 400 500 040 720 QUANTITY (Pairs of Ooh boots)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Related questions

Question

Now, suppose that Barefeet can practice perfect price discrimination-that is, it knows each consumer's willingness to pay for each pair of Ooh boots
and is able to charge each consumer that amount.
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 sells its
boots. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the
black points (plus symbol) to shade the deadweight loss in this market with perfect price discrimination. (Note: If you decide that consumer surplus,
profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.)
(?)
100
'+
90
Monopoly Outcome
Prof
Consumer Surplus
Deadweight Loss
Deman
80
240 320 400 450 500 540 720 300
QUANTITY (Pairs of Ooh boots)
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.
Statement
Single-price Monopoly Perfect Price Discrimination
O
There is deadweight loss associated with the profit-maximizing output.
O
Barefeet produces the efficient quantity of Och boots
O
Total surplus is maximized.
O
O
R
10
MC-ATC

Transcribed Image Text:7. Price discrimination and welfare Suppose Barefeet is a monopolist that produces and sells Ooh boots, an amazingly trendy brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Barefeet faces, as well as its marginal cost (MC), which is constant at $30 per pair of Ooh boots. For simplicity, assume that foxed costs are equal to zero; this, combined with the fact that Barefeet's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Barefeet cannot price discriminate. That is, it must charge each consumer the same price for Ooh boots regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) ? + Monopoly Outcome Consumer Surplus Deadweight Loss PRICE (Dollars per pair of Ooh boots) 88228 2288 2 0 MR QUANTITY (Pairs of Ooh boots) MC-ATC Demand 500 640 720 800

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