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In the town of Woodland, California, there are many dentists but only one eye doctor. The market demand curve for eye exams is P = 115 - 2Q, marginal revenue is MR = 115 - 4Q and the marginal cost for an eye exam is constantly $35.
(a) Suppose that the eye doctor charges a single price for all patients. What is the price the eye doctor will charge to maximize profit? And how many eye exams will the eye doctor do?
(b) What is the eye doctor's producer surplus in part (a)? And what is the consumer surplus? Is there any deadweight loss?
(c) Suppose that the eye doctor practices perfect, first-degree price discrimination. What is the lowest price the eye doctor will charge? And how many eye exams will the eye doctor do?
(d) What is the eye doctor's producer surplus in part (c)? And what is the consumer surplus? Is there any deadweight loss?
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