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.

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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.
Transcribed Image Text: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.
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