Rank the scenarios below in terms of how much profit a monop

Rank the scenarios below in terms of how much profit a monopolist will earn by dragging each into the box below. Assume that the scenarios are similar in all ways except for the manner in which the firm prices its good.

Solution

1.

The firm has the ability to perfectly discriminate- If the firm has full dominance in the market it will discriminate for each and every consumer by offering a take it or leave it price.

2.

If the firm has the ability to discriminate it will charge different prices to different consumers.

3.

The firm must charge the same price from all consumers, there will be no discrimination of price in the market and profits will be less.

4.

The firm must charge a price equal to MC: This is the minimum price the firm can charge at which profits are 0.