The block-pricing monopoly faces a linear demand curve for each identical consumer P = 44 – Q. The monopoly has a constant marginal and average cost of 20. The monopoly can set three prices, P₁, P2, P3, depending on the quantity a consumer purchases, where P₁ > P₂ > P3.

The block-pricing monopoly faces a linear demand curve for each identical consumer P = 44 – Q. The monopoly has a constant marginal and average cost of 20. The monopoly can set three prices, P₁, P2, P3, depending on the quantity a consumer purchases, where P₁ > P₂ > P3.

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Problem 1QTC

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Question

What is the value of consumer surplus? What is the value of producer surplus?

The block-pricing monopoly faces a linear demand curve for each identical consumer P = 44 –
Q. The monopoly has a constant marginal and average cost of 20. The monopoly can set three
prices, P₁, P2, P3, depending on the quantity a consumer purchases, where P₁ > P₂ > P3.

Definition Definition Producer’s gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price and up to the equilibrium quantity.

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