Given the industry demand function X(p) = 100 - 2p, consider the following scenario:1) The market is dominated by one monopolist with a marginal cost of 12, but the monopolist now uses third degree pricing. Assume the firm can distinguish between low-demand consumers on the weekday and high-demand consumers on the weekend such that Qh = 55 - (1/2)Ph andQl= 45 - (3/2)Pl. The monopolist charges a difference price, Pl and Ph, in each distinct market.2) The market is dominated by one monopolist that is not able to price discriminate.Please calculate 1) Profits; 2) CS; 3) PS; 4) DWL; and 5) Quantity Sold in the market; for 1) Third Degree Pricing; 2) No Price Discrimination; and then 3) In this setting, if the monopolist has the opportunity to go from no price discrimination to first degree pricing for a fee of 800, should it make the switch? Why or why not? Given the industry demand function X (p) = 100 – 2p, consider the following scenarios:• The market is a perfectly competitive market. Assume there are identical firms with marginalcost of 12 in this perfectly competitive market.• The market is dominated by one monopolist with a marginal cost of 12. This monopolist isable to achieve 1st degree pricing.• The market is dominated by one monopolist with a marginal cost of 12, but the monopolistis able to achieve only 2nd degree pricing. Assume the menu offers only 2 choices:(Qi = 30, pi = 35), and (Q; = 60, p = 20).• The market is dominated by one monopolist with a marginal cost of 12, but the monopolistnow uses 3rd degree pricing. Assume the firm can distinguish between low-demand consumerson the weekday and high-demand consumers on the weekend such that Qh = 55 - ph andQe = 45 – Pe. The monopolist charges a difference price, pe and ph, in each distinct market.• The market is dominated by one monopolist that is not able to price discriminate.Calculate the following values and fill in the table according to the 5 scenarios above1st Deg.2nd Deg. | 3rd Deg. No Price Discrim.Profits TCSPSDWLQuantity Soldin MarketIn this setting, if the monopolist has the opportunity to go from no price discrimination to 1stdegree pricing for a fee of 800, should it make the switch? Why or why not?

Answered: Given the industry demand function X(p)…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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Given the industry demand function X(p) = 100 - 2p, consider the following scenario:

1) The market is dominated by one monopolist with a marginal cost of 12, but the monopolist now uses third degree pricing. Assume the firm can distinguish between low-demand consumers on the weekday and high-demand consumers on the weekend such that Qh = 55 - (1/2)Ph and
Ql= 45 - (3/2)Pl. The monopolist charges a difference price, Pl and Ph, in each distinct market.

2) The market is dominated by one monopolist that is not able to price discriminate.

Please calculate 1) Profits; 2) CS; 3) PS; 4) DWL; and 5) Quantity Sold in the market; for 1) Third Degree Pricing; 2) No Price Discrimination; and then 3) In this setting, if the monopolist has the opportunity to go from no price discrimination to first degree pricing for a fee of 800, should it make the switch? Why or why not?

Given the industry demand function X (p) = 100 – 2p, consider the following scenarios:
• The market is a perfectly competitive market. Assume there are identical firms with marginal
cost of 12 in this perfectly competitive market.
• The market is dominated by one monopolist with a marginal cost of 12. This monopolist is
able to achieve 1st degree pricing.
• The market is dominated by one monopolist with a marginal cost of 12, but the monopolist
is able to achieve only 2nd degree pricing. Assume the menu offers only 2 choices:
(Qi = 30, pi = 35), and (Q; = 60, p = 20).
• The market is dominated by one monopolist with a marginal cost of 12, but the monopolist
now uses 3rd degree pricing. Assume the firm can distinguish between low-demand consumers
on the weekday and high-demand consumers on the weekend such that Qh = 55 - ph and
Qe = 45 – Pe. The monopolist charges a difference price, pe and ph, in each distinct market.
• The market is dominated by one monopolist that is not able to price discriminate.
Calculate the following values and fill in the table according to the 5 scenarios above
1st Deg.
2nd Deg. | 3rd Deg. No Price Discrim.
Profits T
CS
PS
DWL
Quantity Sold
in Market
In this setting, if the monopolist has the opportunity to go from no price discrimination to 1st
degree pricing for a fee of 800, should it make the switch? Why or why not?

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