Answer to Question #174089 in Microeconomics for EBENEZER

Question

Assuming that a profit maximizing monopolist faces a demand curve of  Q=20-P  and his average cost is AC=24/Q + Q

a.      Assume further that the firm practices 1^st degree price discrimination, how large is the producer surplus if the total fixed cost is sunk?

b.      Suppose price discrimination is not possible but the fixed cost is still sunk, how large is the producer surplus?

c.      Comment on the answers in (a) and (b) above

Answer 1

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