Consider a monopoly with the following marginal cost and demand curves: MC = 2Q + 200, p = 2,600 – 2Q A welfare analysis of the equilibrium resulting from the monopolist's profit-maximization is shown in the figure below. 2600 MC CS pM-1800 DWL PS PS 200 MR qM-400 650 1300 a. Suppose this monopolist is able to perfectly (1st-degree) price discriminate. How many units are bought and sold in this market, and for which range of prices these units are sold for? b. Consider total welfare in the equilibrium resulting from the monopolist's profit-maximization when it practices 1st-degree price discrimination. Without calculating anything, can you tell if the total surplus (CS + PS) in this market is more, less, or the same as before in the equilibrium without price discrimination)? Why is this? --------

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Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.