Suppose ‘Car Today’ is the only firm selling cars in a small, rural town in Victoria. Assume that people in the town do not want to leave the town to buy cars. Also assume that there is a constant marginal cost for ‘Car Today’. 1. What type of market structure do you think ‘Car Today’ belongs to? Why? Explain in 100 words or less. 2. Draw a graph for Car Today that shows the firm carrying out perfect price discrimination (first degree). Label the producer surplus, consumer surplus, and deadweight loss in the graph. 3. Now suppose the city council hears of Car Today’ practices and outlaws price discrimination (and assume they can successfully enforce it). Draw a NEW GRAPH showing what Car Today will do to maximize profits. Label the producer surplus, consumer surplus, and deadweight loss in the graph.
Suppose ‘Car Today’ is the only firm selling cars in a small, rural town in Victoria. Assume that people in the town do not want to leave the town to buy cars. Also assume that there is a constant marginal cost for ‘Car Today’.
1. What type of market structure do you think ‘Car Today’ belongs to? Why? Explain in 100 words or less.
2. Draw a graph for Car Today that shows the firm carrying out perfect
3. Now suppose the city council hears of Car Today’ practices and outlaws price discrimination (and assume they can successfully enforce it). Draw a NEW GRAPH showing what Car Today will do to maximize profits. Label the producer surplus, consumer surplus, and deadweight loss in the graph.
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which grpah is the correct graph for part 2
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