Consider a monopolist facing two consumers with the following two inverse demand functions: P=200-4Q1 and P=122- 6Q2. Assume that fixed costs are zero and that the marginal cost is equal to $8. a) Suppose the monopolist can differentiate between the two consumers. The monopolist decides to use a twopart tariff that permits both consumers to stay in the market. Solve for each consumer’s demand, fixed fee and monopolist profits. b) Assume the monopolist cannot differentiate between the two consumers and hence cannot apply a two-part tariff. He decides to serve both consumers. Solve for the equilibrium aggregate demand and price in the market, demand of each consumer and the monopolist profit.
Consider a monopolist facing two consumers with the following two inverse
a) Suppose the monopolist can differentiate between the two consumers. The monopolist decides to use a twopart
tariff that permits both consumers to stay in the market. Solve for each consumer’s demand, fixed fee and
monopolist profits.
b) Assume the monopolist cannot differentiate between the two consumers and hence cannot apply a two-part
tariff. He decides to serve both consumers. Solve for the equilibrium aggregate demand and
market, demand of each consumer and the monopolist profit.
Two-part pricing is a pricing strategy often used by businesses to maximize their profits, particularly in industries where they can differentiate between customers based on their willingness to pay.
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