A firm has the cost function: TC = Q² It sells its goods in
two markets with different demands:
QA = 330 - 2PA & QB = 510 - 4PB
a) If the firm can practice third-degree price
discrimination, how much will the firm produce? What will be the optimal price
and quantity in each market?
b) Under first-degree price discrimination, how does the
relationship between demand and marginal revenue change? What happens to output
and profits, to social, consumer and producer surpluses and deadweight loss?
(No calculations required.)
c) What are the conditions for Pareto efficiency? Are they
met in the two cases above, if the only other industry in this economy, and all
factor markets, are perfectly competitive?