A7 Suppose a monopolist sells a product to two consumers i = 1,2 with linear inverse demand functions pi =26-21 and p2 = 23-422, where x; and p, are the quantity demanded and the price per unit paid by consumer i, respectively. The monopolist has a constant marginal cost equal to 2. Determine the profit-maximising solution to the second-degree price discrimination problem, where the monopoly offers take-it or leave-it contracts of quantity z, for a total price of ri (i = 1,2) that each consumer will self-select. What consumer surplus does consumer 1 obtain from purchasing and consuming each package?

What is the usual shape of a total revenue curve for a monopolist? Why?

Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium for such a market. b. Now suppose the demand for Hula Hoops shifts outward slightly. Show that, in general (contrary to the competitive case), it will not be possible to predict the effect of this shift in demand on the market price of Hula Hoops. c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.

How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?