Question

2. A monopolist has two specific demanders with demand equations: q_A = 10 – p and q_B = 10 – 2p. This monopolist implements an optimal two-part tariff pricing scheme, under which demanders pay a fixed feea for the right to consume the good and a uniform price p for each unit consumed. The monopolist chooses a and p to maximize profits. This monopolist produces at constant average and marginal costs of AC = MC = 2. The monopolist’s profits are __________ and the average price paid by demander B is _________.

Answer 1