Question 5. Monopolist with Price Discrimination [Ch.15] (Handout 7)Consider a market served by a single producer. The total cost function for this monopolist is TC=050.The monopolist's marginal cost is: MC-Q.Suppose there are two classes of buyers in this market. The demand functions for the two classes are:Class 1: P-10-Q/2 (or Q-20-2P),Class 2: P-14-2Q (or Q-7-P/2)When the monopolist CANNOT distinguish between the two classes, we can graph the market demandcurve and the monopolist's MR as shown in the graphs below.Class IP1071CSIP Class I10 7PACSI14PClass II1410CS IID₂D₁3.220 QSuppose the monopolist acts as a third degree price discriminator. By the following questions, we arefinding the price and quantity pairs that a price discriminating monopolist would set for the two classes.With a third-degree price discrimination, we can graph the market demand curve and the monopolist'sMR as shown in the graphs below.2.8 7Class II7 CS IID₂MR₂D₂MR4 10 20 Q 2 7Page 4PShow Transcribed TextA8.4QMR6 13.56MRMC13.5MC2727a(1) What is the quantity the monopolist will produce?(2) What is the quantity supplied to Class 1? What is the quantity supplied to Class2?(3) What is the price for Class 1? What is the price for Class2?(4) What is the monopolistic price if a single price were set for both classes?(5) What is the profit the monopolist would make if a single price were set for both classes? Is the profitbigger or smaller? (Compare with the case in which a monopolist acts as a thjud degs.pricediscriminator)

Monopoly market structure is defined as the one in which there is single seller in the market. The…

(1) What is the quantity the monopolist will produce? (2) What is the quantity supplied to Class 1? What is the quantity supplied to Class2? (3) What is the price for Class 1? What is the price for Class2? (4) What is the monopolistic price if a single price were set for both classes? (5) What is the profit the monopolist would make if a single price were set for both classes? Is the profit bigger or smaller? (Compare with the case in which a monopolist acts as a third degree price discriminator)

(1) What is the quantity the monopolist will produce? (2) What is the quantity supplied to Class 1? What is the quantity supplied to Class2? (3) What is the price for Class 1? What is the price for Class2? (4) What is the monopolistic price if a single price were set for both classes? (5) What is the profit the monopolist would make if a single price were set for both classes? Is the profit bigger or smaller? (Compare with the case in which a monopolist acts as a third degree price discriminator)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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