You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1's elasticity of demand is -5, while group 2's is -2. Your marginal cost of producing the product is $30. a. Determine your optimal markups and prices under third-degree price discrimination. Instructions: Enter your responses rounded to two decimal places. Markup for group 1: Price for group 1: $| Markup for group 2: [ Price for group 2: $ b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box. At least one group has elasticity of demand greater than 1 in absolute value. We are able to prevent resale between the groups. There are two different groups with different (and identifiable) elasticities of demand. At least one group has elasticity of demand less than one in absolute value.

You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1's elasticity of demand is -5, while group 2's is -2. Your marginal cost of producing the product is $30. a. Determine your optimal markups and prices under third-degree price discrimination. Instructions: Enter your responses rounded to two decimal places. Markup for group 1: Price for group 1: $| Markup for group 2: [ Price for group 2: $ b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box. At least one group has elasticity of demand greater than 1 in absolute value. We are able to prevent resale between the groups. There are two different groups with different (and identifiable) elasticities of demand. At least one group has elasticity of demand less than one in absolute value.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Price Discrimination

Price discrimination or differential pricing is based on the principle that the seller will charge the buyer a price based on the buyer’s ability and willingness to pay for the product rather than applying uniform pricing for all.

Question

You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your
firm have determined that group 1's elasticity of demand is -5, while group 2's is-2. Your marginal cost of producing the product is
$30.
a. Determine your optimal markups and prices under third-degree price discrimination.
Instructions: Enter your responses rounded to two decimal places.
Markup for group 1: [
Price for group 1: $1
Markup for group 2:
Price for group 2: $1
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to
place a check mark. For incorrect answer(s), click twice to empty the box.
At least one group has elasticity of demand greater than 1 in absolute value.
We are able to prevent resale between the groups.
There are two different groups with different (and identifiable) elasticities of demand.
At least one group has elasticity of demand less than one in absolute value.

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