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Price Ceilings/Discrimination

1. Consider a price ceiling imposed on a monopoly that is set below the competitive price. Design a diagram showing the monopoly equilibrium in this case. Use your diagram to show that a price ceiling set this low will create a shortage.

2. What conditions must hold for a firm to be able to practice price discrimination? How are consumers affected by price discrimination? Elaborate about how consumers are affected.

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Solution Summary

Price Ceilings/Discrimination are highlighted.