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 -6, while group 2's is -3. Your marginal cost of producing the product is $70. 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. ? There are two different groups with different (and identifiable) elasticities of demand. ? We are able to prevent resale between the groups. ? At least one group has elasticity of demand greater than 1 in absolute value. ? 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 -6, while group 2's is -3. Your marginal cost of producing the product is $70. 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. ? There are two different groups with different (and identifiable) elasticities of demand. ? We are able to prevent resale between the groups. ? At least one group has elasticity of demand greater than 1 in absolute value. ? At least one group has elasticity of demand less than one in absolute value.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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 -6, while group 2's is -3. Your marginal cost of producing the product is
$70.
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.
? There are two different groups with different (and identifiable) elasticities of demand.
? We are able to prevent resale between the groups.
? At least one group has elasticity of demand greater than 1 in absolute value.
? At least one group has elasticity of demand less than one in absolute value.
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