7) (10 points) Suppose there are two types of people. Type 1 has the inverse demand function p1(y1) = 200 – y1 (with MR = 200 – 2y1 and the second type has the inverse = 100 – y2 (with MR = 100 – 2y2. Suppose that the firm can demand function p2(y2) = - charge a different price to each group (third-degree price discrimination) and that the firm faces the same marginal cost for each type MC = 20, with total cost given by (TC = 20(y1 + Y2)). a) What quantity and price is offered to each type? What is the profit (yı + Y2) Then they face the inverse demand p = 150 – y/2 (With MR=150 – y) in this case what would be the b) Suppose that a monopolist cannot discriminate. Define y = - common price and quantity sold? What would be the new profit? c)Explain in words how the two cases differ and why.

7) (10 points) Suppose there are two types of people. Type 1 has the inverse demand function p1(y1) = 200 – y1 (with MR = 200 – 2y1 and the second type has the inverse = 100 – y2 (with MR = 100 – 2y2. Suppose that the firm can demand function p2(y2) = - charge a different price to each group (third-degree price discrimination) and that the firm faces the same marginal cost for each type MC = 20, with total cost given by (TC = 20(y1 + Y2)). a) What quantity and price is offered to each type? What is the profit (yı + Y2) Then they face the inverse demand p = 150 – y/2 (With MR=150 – y) in this case what would be the b) Suppose that a monopolist cannot discriminate. Define y = - common price and quantity sold? What would be the new profit? c)Explain in words how the two cases differ and why.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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