Q1
a. Using a market model (ONLY), clearly show the perfectly competitive market outcome (price & quantity) and compare that with the monopoly outcome (price & quantity). Clearly identify the deadweight loss that results from the monopoly. What is allocative efficiency? On your model, clearly show why monopoly firms are NOT allocatively efficient.
b. Clearly describe perfect price discrimination. Using a market model, show how a perfectly price discriminating monopolist is more efficient than a monopolist who does not price discriminate. Why might consumers not like perfect price discrimination?
In: Economics
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