In a monopoly, the average cost and the marginal cost are fixed and equal. According to this; Draw the cost, demand, and marginal revenue curves for the monopoly. Indicate the price the monopoly would charge in the absence of discrimination. On your graph, indicate the area corresponding to the monopoly profit, which will be called X. Indicate the consumer surplus (Y) and the deadweight loss. Suppose now that the monopoly practices perfect discrimination. What then is the profit of the monopoly (give your answer in terms of X, Y and Z)How does price discrimination affect monopoly profit? What is the effect on the total surplus? Which is the more important of the two effects? Explain in terms of X, Y and Z.
In a
Draw the cost, demand, and marginal revenue
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