There are two types of consumers: one half of consumers are type 1 (low type) and the other half= 8 – P, while type 2's demand is given byP. Consider a monopolist selling its product to these consumers. Assume that the marginalare type 2 (high type). Type l's demand curve is q1-q2 = 12 –cost is equal to zero.Now suppose that the firm can separate type 1 from type 2. That is, market segmentation ispossible, and so the firm charges P for type 1, while charging P2 for type 2.(1) What should be the profit-maximizing P for type 1 consumers?(2) What should be the profit-maximizing P2 for type 2 consumers?(3) What is the social surplus under P and P2 computed in 1.2.(1)-(2)?

Given information Type 1 demand function q1=8-P type 2 demand function q2=12-P Marginal cost=0

Answered: There are two types of consumers: one…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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