Question

Suppose that a price-discriminating monopolist has segregated its market into two groups of buyers as shown in the table below. a. Calculate the missing total-revenue and marginal-revenue amounts for Group 1. Instructions: Enter your answers as whole numbers in the gray-shaded cells. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Group 1 Group 2 Price Quantity Total Marginal Total Quantity Marginal Demanded Revenue Price Revenue Demanded Revenue Revenue $115

Answer 1

Answer:

Total revenue is P * Q

Marginal revenue = change in TR / change in Q

Group 1	Group 2
P	Q	TR	MR	P	Q	TR	MR
115	0	0
100	1	100	100
83	2	166	66
71	3	213	47	71	0	0
63	4	252	39	63	1	63	63
55	5	275	23	55	2	110	47
48	6	288	13	48	3	144	34
42	7	294	6	42	4	168	24
37	8	296	2	37	5	185	17
33	9	297	1	33	6	198	13
29	10	290	-7	29	7	203	5

b) MC = ATC = 13

Hence, MC = MR gives

Group 1: 6 units at a price of $48

Group 1: 6 units at a price of $33

c) Group 2 has high elasticity because price is low

d) Total economic profit = (48-13)*6 + (33-13)*6 = 35 * 6 + 20*6 = 210 + 120 = $330