Question

3. As the only provider of surgery services in the area, your practice holds a monopoly on the local elective surgery market. The annual inverse demand curve for elective surgery services in your area is P = 1000 − Q, where P is price and Q is market quantity. Every person that comes to you either gets one surgery or none (you have no repeat customers). Your marginal cost of providing a surgery is constant at $100. a) Write out the equation for the marginal revenue curve (you may use calculus or any shortcuts you know for linear demand curves). What is the profit maximizing number of surgeries for you to offer in a given year, assuming you charge all customers the same price? b) What is the surplus maximizing number of surgeries (hint: where would a perfectly competitive market produce)? c) Is this market the kind of situation where price discrimination is likely to be possible? Make specific reference to the three necessary conditions for price discrimination to work. d) Via some stellar market research, you determine the willingness to pay (WTP) of each of your customers. What kind of price discrimination could you use here? How many surgeries will you provide? What consequences does this have for total surplus? What about consumer surplus?

          3. As the only provider of surgery services in the area, your practice holds a monopoly on the local elective surgery market. The annual inverse demand curve for elective surgery services in your area is P = 1000 − Q, where P is price and Q is market quantity. Every person that comes to you either gets one surgery or none (you have no repeat customers). Your marginal cost of providing a surgery is constant at $100. 
a) Write out the equation for the marginal revenue curve (you may use calculus or any shortcuts you know for linear demand curves). What is the profit maximizing number of surgeries for you to offer in a given year, assuming you charge all customers the same price? 
b) What is the surplus maximizing number of surgeries (hint: where would a perfectly competitive market produce)? 
c) Is this market the kind of situation where price discrimination is likely to be possible? Make specific reference to the three necessary conditions for price discrimination to work. 
d) Via some stellar market research, you determine the willingness to pay (WTP) of each of your customers. What kind of price discrimination could you use here? How many surgeries will you provide? What consequences does this have for total surplus? What about consumer surplus?

Added by Rafael O.

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