Problem
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer.
1. Draw a correctly labeled graph for a single-price monopoly and show the profit-maximizing quantity, labeled Q1
2. Assume the monopoly now engages in perfect price discrimination. On your graph in part (1), show the profit-maximizing quantity for the price-discriminating monopoly, labeled Q2
3. Based on your answer in part (b), what will happen to the consumer surplus? Explain.
4. Is the output produced by the perfectly price-discriminating monopolist allocatively efficient? Explain.