(a) A competitive market will set price equal to marginal cost, producing Q_c and selling at a price of P_c. Consumers will receive a consumer surplus equal to A + B + C and the firm will earn zero producer surplus. A single-price monopoly will sell quantity Q_m at a price of P_m and receive a producer surplus equal to B. Consumers will receive consumer surplus equal to A and the deadweight loss from market power will be area C.
(b) If a firm with market power can identify each customer’s demand curve, then it will charge each customer her willingness to pay and capture the entire surplus, A + B + C. For example, the firm will charge a customer willing to pay P_d exactly the price P_d and a customer willing to pay P_f the price P_f. The firm will sell up to the quantity Q_c, the perfectly competitive quantity where P_c = MC. There is no deadweight loss when a firm practices perfect price discrimination.