The accompanying figure depicts the downward-sloping market demand (D) curve for a five-day western Caribbean cruise on Carnival Cruise Lines. The price (P) is per person in U.S. dollars, and the quantity (Q) is the number of passenger tickets sold. This figure also shows the company's relevant marginal revenue (MR) curve and marginal cost (MC) curve. Use this figure to answer the questions.
-Calculate the change in total welfare if Carnival Cruise Lines moves from a perfect price discrimination model to a monopolist model that charges a single price.

Question

The accompanying figure depicts the downward-sloping market demand (D) curve for a five-day western Caribbean cruise on Carnival Cruise Lines. The price (P) is per person in U.S. dollars, and the quantity (Q) is the number of passenger tickets sold. This figure also shows the company's relevant marginal revenue (MR) curve and marginal cost (MC) curve. Use this figure to answer the  questions. 
-Calculate the change in total welfare if Carnival Cruise Lines moves from a perfect price discrimination model to a monopolist model that charges a single price.

Quizplus · Accepted Answer

Moving from perfect price discrimination to a monopolist model that charges a single price would result in a deadweight loss of consumer surplus, which is equal to the area between the demand curve and the single price charged. In this case, the deadweight loss would be equal to $400,000 (the area between points A, B, and C on the graph). There would be no producer surplus gained, as Carnival Cruise Lines is already a monopolist and capturing all producer surplus. Therefore, the net change in total welfare would be a loss of $400,000.

The Accompanying Figure Depicts the Downward-Sloping Market Demand (D) Curve