4. Consider a monopolist with cost funetion c(q) = 20g, who is facing two con- sumers. The consumers' demand functions are given by 91= 100 -p 92 = 300 – 3p. (a) Suppose the monopolist does not price discriminate. Find the monopolist's optimal pricing strategy, the resulting profit, and Lerner Index. (b) Suppose the monopolist can engage in third degree price discrimination. Find the monopolist's optimal pricing strategy and the resulting profit. Compare the profit with that found in part (a), and give an intuitive ex- planation. (c) Now, suppose the monopolist can produce the good at zero cost. That is clq) = 0. Find the monopolist's optimal second degree price discrimination strategy.
4. Consider a monopolist with cost funetion c(q) = 20g, who is facing two con- sumers. The consumers' demand functions are given by 91= 100 -p 92 = 300 – 3p. (a) Suppose the monopolist does not price discriminate. Find the monopolist's optimal pricing strategy, the resulting profit, and Lerner Index. (b) Suppose the monopolist can engage in third degree price discrimination. Find the monopolist's optimal pricing strategy and the resulting profit. Compare the profit with that found in part (a), and give an intuitive ex- planation. (c) Now, suppose the monopolist can produce the good at zero cost. That is clq) = 0. Find the monopolist's optimal second degree price discrimination strategy.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.5P
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![4. Consider a monopolist with cost funetion c(q) = 20g, who is facing two con-
sumers. The consumers' demand functions are given by
91 = 100 - p
92 = 300 – 3p.
(a) Suppose the monopolist does not price discriminate. Find the monopolist's
optimal pricing strategy, the resulting profit, and Lerner Index.
(b) Suppose the monopolist can engage in third degree price discrimination.
Find the monopolist's optimal pricing strategy and the resulting profit.
Compare the profit with that found in part (a), and give an intuitive ex-
planation.
(c) Now, suppose the monopolist can produce the good at zero cost. That is
clq) = 0. Find the monopolist's optimal second degree price discrimination
strategy.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F93d78a7c-cba1-4331-9699-87fb481e1060%2F9b7faf2d-be0b-43bf-ab5e-cc5413dd5a0d%2Fbr15mj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. Consider a monopolist with cost funetion c(q) = 20g, who is facing two con-
sumers. The consumers' demand functions are given by
91 = 100 - p
92 = 300 – 3p.
(a) Suppose the monopolist does not price discriminate. Find the monopolist's
optimal pricing strategy, the resulting profit, and Lerner Index.
(b) Suppose the monopolist can engage in third degree price discrimination.
Find the monopolist's optimal pricing strategy and the resulting profit.
Compare the profit with that found in part (a), and give an intuitive ex-
planation.
(c) Now, suppose the monopolist can produce the good at zero cost. That is
clq) = 0. Find the monopolist's optimal second degree price discrimination
strategy.
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