Managerial Economics – HW 5Name:_____________________ Must Show Work for Full or Partial...

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Managerial Economics – HW 5Name:_____________________ Must Show Work for Full or Partial CreditQuestion 1: Part A: Graph a case of 1st degree price discrimination.  Part B: Graphically show why a monopoly that engages in 1st degree price discrimination results in lower deadweight loss to society than a monopoly that cannot engage in price discrimination.. Question 2:Part A: Describe how you would implement 2nd degree price discrimination for a hypothetical business.Part B: Graph a case of 2nd degree price discrimination.  Graphically show why 2nd degree price discrimination results in higher profits for the firm.  Part C: Provide an example of 2nd degree price discrimination based on something other than bulk sales.Question 3:Part A: Describe how you would implement 3rd degree price discrimination for a hypothetical business. Part B: Graph a case of 3rd degree price discrimination.  Graphically show why 3rd degree price discrimination results in higher profits for the firm.Question 4:Part A: How does resale undermine price discrimination?Part B: Provide an example of 2nd degree price discrimination and an example of 3rd degree price discrimination protected from resale.  Make sure to describe why your examples are successfully protected from resale.

Dr. Smita · Accepted Answer

Question 1
Part A:
A monopolist engaging in first-degree price discrimination charges different prices for each unit purchased. The same has been depicted in the following graph:
The monopolist charges different prices at different quantities at different points on the demand curve (A, B, C)
Part B:
A monopolist engaged in first-degree price discrimination creates lower deadweight loss as compared to monopolists not engaged in price discrimination.
First-degree price discrimination is the highest degree of price discrimination. Each unit is sold at the highest price possible that the consumer is willing to pay implying that the producer eats away all the surpluses in the economy leaving no scope for deadweight loss.
MR=MC is the profit-maximizing quantity, Q* and P* as quantity and price. In the case of a normal monopoly, deadweight losses could have occurred in the area shown as a shaded triangle. But since the monopolist has resorted to the practice of charging different prices at different quantities,

Managerial Economics – HW 5 Name:_____________________ Must Show Work for Full or Partial Credit Question 1: Part A: Graph a case of 1st degree price discrimination. Part B: Graphically show why a...

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