1. Consider a monopolist with unit cost c = 30, facing two separate markets with demand...
1. Consider a monopolist with unit cost c = 30, facing two separate markets with demand functions D1(p1) = 150 - p1 and D2(p2) = 130 - p2.
(a) Find the optimal price-quantity pairs (p*1, q*1) and (p*2, q*2) with price discrimination.
(b) Find the optimal price p* and quantity q* without price discrimination. Compare them to the answers in (a)
(c) Compare total welfare with and without price discrimination. Explain your answer.
Homework Answers
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1. Consider a monopolist with unit cost c = 30, facing two
separate markets with demand...
A monopolist sells in two markets that have demand functions given by D1 (p1) = 100...
A monopolist sells in two markets that have demand functions given by D1 (p1) = 100 - p1 and D2 (p2) = 100 - (1/2) p2: The marginal cost of production is constant at c = 20. (a) Assume the firm charges different prices to each group. What will be the equilibrium quantities in markets 1 and 2? (b) What market pays a higher price? Why?
A monopolist sells in two markets. The demand curve for her product is given by p1...
A monopolist sells in two markets. The demand curve for her product is given by p1 = 120 y1 in the first market; and p2 = 105 y2 2 in the second market, where yi is the quantity sold in market i and pi is the price charged in market i. She has a constant marginal cost of production, c = 10, and no fixed costs. She can charge different prices in the two markets. 1) Suppose the monopolist charges...
2. This question is adapted from our textbook. A monopolist has two segmented markets with demand...
2. This question is adapted from our textbook. A monopolist has two segmented markets with demand curves given by P1 = 160 – 91 P2 = 130 – 592 where pı and p2 are the prices charged in each market segment, and qı and q2 are the quantities sold. Its cost function is given by c(q) = 2q2, where q = (1 + 02. Find the monopolist's profit maximising prices p*, pand outputs q*, q* sold in each market.
1. [20] A monopolist with cost function c(Q) = 2 faces a consumer whose demand functions...
1. [20] A monopolist with cost function c(Q) = 2 faces a consumer whose demand functions are given by. 01 20 P and Q2 40 2P. (a) 5] Suppose the monopolist cannot engage in any price discrimination. Find the firm's optimal pricing strategy. Calculate the firm's Lerner index. (b) 15) What is the deadweight loss (relative to the competitive market out- come) associated with this pricing strategy, if any? (c) 15) Now, suppose price discrimination is possible. Find the monopolist's...
1. A monopolist with marginal cost of production of 40 sells to two distinct consumers. For...
1. A monopolist with marginal cost of production of 40 sells to two distinct consumers. For consumer 1, demand is given by Q1 = 300 - P1. For consumer 2, it is given by Q2 = 180 - P2. a. Determine the optimal uniform price and output when discrimination is impossible. b. Assume third-degree discrimination between the two consumers is possible. What price will be set for each consumer? What quantity will be sold for each consumer? c. How does...
Consider a monopolist selling in two markets. The demands in markets 1 and 2 are given...
Consider a monopolist selling in two markets. The demands in markets 1 and 2 are given by q1 =100−p1 q2 =120−1/2p2 Marginal cost is constant and given by MC = 20. There are no fixed costs. Find a) optimal output, price in market 1, b) optimal output and price in market 2 and c) total profit. What can we say about demand elasticities of the two markets at the optimal outputs?
Consider a monopolist with the cost function C(q) = 6q, facing the market demand function D(p)...
Consider a monopolist with the cost function C(q) = 6q, facing the market demand function D(p) = 20 − 2p. (a) Find the monopoly quantity and price, the monopolist’s profit and the con- sumer surplus. (b) Now suppose that the government gives to the monopolist a subsidy of $2 per unit sold. Find the monopoly quantity and price, the monopolist’s profit, the consumer surplus, and the cost of the subsidy. (c) How does this subsidy affect total surplus (taking into...
(3rd Degree Price Discrimination) A Monopolist selling a cell phone in two separate markets. They must...
(3rd Degree Price Discrimination) A Monopolist selling a cell phone in two separate markets. They must decide how much to sell in each market in order to maximize their total profits. The demand in the Brazilian Market is : QBrazil = 120 – 10PBrazil The demand in the United States Market is: QUSA = 60 – 20PUSA If Total Cost is: TC = 90 + 2(QUSA +QBrazil) Calculate the Price and Quantity if the Monopolist Maximized their profit...
Consider a monopolist facing the following inverse demand function: P = 200 - Q The total...
Consider a monopolist facing the following inverse demand function: P = 200 - Q The total cost function is given by C = 100 + 50Q + 0.5Q^2 What is the monopolist's uniform profit-maximizing price? a. 130 b. 140 c. 150 d. 160
1. (0 A monopolist with cost function e(Q)-jo* faces a consumer whose demand functions are given...
1. (0 A monopolist with cost function e(Q)-jo* faces a consumer whose demand functions are given by (a) [51 Suppose the monopolist cannot engage in any price discrimination. (b) [5) What is the deadweight loss (relative to the competitive market out (c) [5] Now, suppose price discrimination is possible. Find the monopolist's (d) [51 What information is required for the monopolist to be able to use Qi=20-P and Q-40-2P. Find the firm's optimal pricing strategy. Calculate the firm's Lerner index....
2. This question is adapted from our textbook. A monopolist has two segmented markets with demand curves given by P1 = 160 – 91 P2 = 130 – 592 where pı and p2 are the prices charged in each market segment, and qı and q2 are the quantities sold. Its cost function is given by c(q) = 2q2, where q = (1 + 02. Find the monopolist's profit maximising prices p*, pand outputs q*, q* sold in each market.
1. [20] A monopolist with cost function c(Q) = 2 faces a consumer whose demand functions are given by. 01 20 P and Q2 40 2P. (a) 5] Suppose the monopolist cannot engage in any price discrimination. Find the firm's optimal pricing strategy. Calculate the firm's Lerner index. (b) 15) What is the deadweight loss (relative to the competitive market out- come) associated with this pricing strategy, if any? (c) 15) Now, suppose price discrimination is possible. Find the monopolist's...
1. A monopolist with marginal cost of production of 40 sells to two distinct consumers. For consumer 1, demand is given by Q1 = 300 - P1. For consumer 2, it is given by Q2 = 180 - P2. a. Determine the optimal uniform price and output when discrimination is impossible. b. Assume third-degree discrimination between the two consumers is possible. What price will be set for each consumer? What quantity will be sold for each consumer? c. How does...
1. (0 A monopolist with cost function e(Q)-jo* faces a consumer whose demand functions are given by (a) [51 Suppose the monopolist cannot engage in any price discrimination. (b) [5) What is the deadweight loss (relative to the competitive market out (c) [5] Now, suppose price discrimination is possible. Find the monopolist's (d) [51 What information is required for the monopolist to be able to use Qi=20-P and Q-40-2P. Find the firm's optimal pricing strategy. Calculate the firm's Lerner index....
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