(Solved): 7. Price discrimination and welfare Suppose Clomper's is a monopolist that manufactures and sells S ...

7. Price discrimination and welfare Suppose Clomper's is a monopolist that manufactures and sells Stompers, an extremely trendy shoe brand with no close substitutes. The following graph shows the market demand and marginal revenue (MR) curves Clomper's faces, as well as its marginal cost (MC), which is constant at \( \$ 30 \) per pair of Stompers. For simplicity, assume that fixed costs are equal to zero; this, combined with the fact that Clomper's marginal cost is constant, means that its marginal cost curve is also equal to the average total cost (ATC) curve. First, suppose that Clomper's cannot price discriminate. That i5, it must charge each consumer the same price for Stompers regardless of the consumer's willingness and ability to pay. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity. Next, use the purple points (diamond symbol) to shade the profit, the green points (triangle symbol) to shade the consumer surplus, and the black points (plus symbol) to shade the deadweight loss in this market without price discrimination. (Note: If you decide that consumer surplus, profit, or deadweight loss equals zero, indicate this by leaving that element in its original position on the palette.) Suppose now that Clomper's is able to perfectly price discriminate-that is, it knows each consumer's willingness to pay for a pair of Stompers and is able to charge each consumer precisely that amount. On the following graph, use the black pount (plus symbol) to. indicate the profit-thammitring quantify sold and ehe lowest price at which the firin seils its boots: Nexc, use the purple pounts (diamond symbol) to stade the profit, the green points (thangle symbol) to shade che consumer surplusy and the black points (plus symbol) to shade the deadiveight loss in this market with perfect price discrimination. (Note: If you decide that consumer sumplus, profit, or deadweight loss equals zero, indicate this by leawing that element in its eriginal position on the palette.) Consider the welfare effects when the industry operates under a monopoly and cannot price discriminate versus when it can price discriminate. Complete the following table by indicating under which market conditions each of the statements is true. (Note: If the statement isnt true for either sangle-price monopolies or perfect price discrimanation, leave the entare row unchecked.) Check all that apply,