At the point of profit minimization, the value of consumer surplus is zero and the value of producer surplus is $28, 000. This is due to the fact that in perfect price discrimination the firm or the producer pays the difference. i. (2 points) If the Dabbers Diamonds perfectly rice-discriminates, what would be the price they would charge for the second diamond ring and for the fourth diamond ring. How likely is it that the Dabbers Diamonds would be able to perfectly price-discriminate? Briefly explain.
If the Dabbers Diamonds perfectly price-discriminates, they would charge $12, 000 for the second diamond ring and $10, 000 for the fourth diamond ring. It is unlikely that Dabbers Diamonds will be able to price discriminate. There are no supermarkets per say in the diamond industry so it is difficult to isolate a separate price for an individual group of people. Diamonds are also a product which can be resold. This goes against both fundamental principles for a firm to be perfectly price discriminatory, 1 .
Separate its market into supermarkets with different prices within said markets, and 2. Prevent buyers from purchasing for a low price and reselling it in another supermarket for higher. J. (2 points) Alternatively, if the company is broken up into many small firms that are forced to operate as a perfectly competitive industry, what will be the profit maximizing quantity of diamond rings produced and the price charged per ring by the industry in the long run? In a perfectly competitive industry, the profit maximizing quantity occurs where price equals marginal cost.