There are two types of consumers: one half of consumers are type 1 (low type) and the other halfare type 2 (high type). Type l's demand curve is q1 = 8 – P, while type 2's demand is given byq2 = 12 – P. Consider a monopolist selling its product to these consumers. Assume that the marginalcost is equal to zero.1.1. Suppose that the firm can charge only one price, P, for each unit.(1)What is the market demand, Q? (Note: Q should be equal to q1 + q2.)What should be P that maximizes the monopoly's profit? For the profit-(2)maximizing P, will both types of consumers purchase the product, or only high type con-sumers purchase?(3)Given the price in (2), what is the resulting social surplus?

Given: Demand curve for low type :- q1 = 8 - P For high type :- q2 = 12 - P

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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