1. The diagram above shows the cost and revenue curves for a monopoly. Identify the following:
Unregulated price and output (P and Q coordinates)
The socially optimal (allocatively efficient) price and output (P and Q coordinates)
The fair return price and output (P and Q coordinates)
Quantity that would maximize revenue (not profit) (Q coordinate)
Suppose that the industry depicted in the graph became perfectly competitive without changing the demand or cost curves. Identify the price and output that would prevail in the perfectly competitive market. (P and Q coordinates)
Using labeling on the graph above, identify the following:
The consumer surplus if the industry was perfectly competitive (three points on the graph)
The consumer surplus for the monopoly (three points on the graph)
The area of dead-weight loss for the monopoly (three points on the graph)
Assume this monopoly started to practice price discrimination without changing its costs. Compared to regular monopoly, what would happen to:
Output (increase or decrease compared to non-price discrimination)
Profit (increase or decrease compared to non-price discrimination)