In the secluded town of Reitsville, a real estate consulting firm called Top Realty provides land developers with advice and guidance for large scale commercial development projects. They are the only firm that provides this service in Reitsville, giving them a monopoly on the market. Top Realty charges each of its clients the same, fixed rate for its services.

a. Draw the marginal cost, demand, and marginal revenue curves for the monopolist. Show the price Top Realty would charge to its clients and the quantity it produces.

b. In your diagram from part (a), mark the area equal to Top Realty's profit and label it A. Mark the area equal to consumer surplus and label it B. Mark the area equal to the deadweight loss and label it C. What is total surplus equal to ? State your answer in terms of areas A,B, and C.

c. Now suppose that top realty can perfectly price discriminate. They achieve this pricing their services based on the exact needs of the client, so each client receives a different price. What quantity will they produce? What is Top Realty's Profit? State your answer in terms of areas A,B, and C.

d. What is the change is the Top Realty's profit from price discrimination? What is the change in total surplus from price discrimination? Which change is larger ? Explain. State your answer in terms of areas A,B, and C.

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