A monopolist faces a market demand curve that is given by P = 1,050 – 50Q.

P | Q | TR | MR | TC | ATC | MC |

$1,050 | 0 | $0 | – | $0 | – | – |

1 | $625.00 | |||||

2 | $637.50 | |||||

3 | $650.00 | |||||

4 | $662.50 | |||||

5 | $675.00 | |||||

6 | $687.50 | |||||

7 | $700.00 | |||||

8 | $712.50 | |||||

9 | $727.00 |

- Fill in the blanks in the table, which shows the monopolist’s costs and revenue situations.
- With reference to the table, what is the profit-maximizing output level (Q
_{m}) for the monopolist? What price (P_{m}) will she charge at that output level? Indicate the rule that you employed to find the answer. - With the profit-maximizing decision that you obtained in part 1.b above, what is the monopolist’s profit? Show how you obtained your answer.
- In a LARGE diagram sketch the information from the table that you
filled out in part 1.a (but do not include the TR and TC numbers in your
diagram). Mark P
_{m}and Q_{m}in the diagram. Shade the area that represents the monopolist’s profit. Indicate which area represents the deadweight loss that is attributable to the monopolist’s behavior. - Suppose the MC-column in the table in part 1.a above represents the
aggregated MC-curves of all the firms in a perfectly competitive
industry. Also assume that the P- and Q-columns together represent the
market demand facing this competitive industry. What would be the
equilibrium price (P
_{c}) and equilibrium quantity (Q_{c}) in that competitive market? - What is the magnitude of the Dead Weight Loss?

- Suppose that a monopolist can identify two distinct groups of customers, students and non-students. The demand by students Qds is given by Qds = 60 – 5Ps and the demand for non-students Qdn is given by Qdn = 30-3Pn. The total demand for the firm’s product—both students and non-students

(Qdtot = Qds + Qdn) is then Qdtot= 90 -8Ptot. The firm’s cost is $7.00 per unit regardless of the number produced and there are no fixed costs. (assume you can’t sell fractions of units).

- Fill in the blanks in the tables, which show the monopolist’s costs and revenue situations. (hint: solve for the inverse demand equations)
- With reference to the table, what is the profit-maximizing output level and price to charge the students?
- With reference to the table, what is the profit-maximizing output level and price to charge the non- students?
- How much profit is made off of students? (remember Profit=TR-TC)
- How much profit is made off of non-students?
- How much profit is made if the firm can price discriminate (profit from both students and non-students)

Now suppose the monopolist is unable to segment the market between students and non-students, which means it only sees the total demand curve of Qtot= 90 -8Ptot.

- Fill in the blanks in the tables, which show the monopolist’s costs and revenue situations.
- With reference to the table, what is the profit-maximizing output level and price to charge all customers?
- How much profit does the monopolist make when it cannot price discriminate?
- Compare the profit when the monopolist can price discriminate and when it cannot.