Constant marginal cost and constant average total cost

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Reference no: EM13801134

De Beers is a monopolist which supplies diamonds with constant marginal cost and constant average total cost.

a) Draw the average cost, marginal cost, demand and marginal revenue curves. Show the price charged by De Beers without price discrimination. (9 marks)

b) Use the diagram drawn in (a), label the area of De Beers’s profit with X, of consumer surplus with Y, and of deadweight loss with Z.

Reference no: EM13801134

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