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Draw the graph showing producer equilibrium for a monopoly with demand, marginal revenue, and marginal cost curves. Identify the profit-maximizing output level (Qm) and price (Pm). Suppose the monopolist sells Qm units of output at the regular price and then puts the product on sale at a lower price, Ps. Show the new price and quantity. Identify the consumer surplus of the additional sales. What happens to the firm’s profits as a result of the sale? Is price discrimination more allocatively efficient? Does price discrimination lead to a more efficient or less efficient outcome? Why or why not? Rubric Criteria Not Evident Developing Proficient Distinguished Weight Correctly draw the graph for producer equilibrium, including demand, marginal revenue & marginal cost 5 Correctly identify the profit maximizing level of output and price 2 Correctly show how much sales will increase in response to the sale. (Show the new price and quantity on the graph.)
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