Question

Suppose that a monopoly sells in two markets with the following demands: Market A PA=1000-QAand Market B: PB=800-2QB. Its Total Cost function is given by: TC=200Q. If monopoly practices third degree price discrimination, what are its combined profits (combined from both markets)?

Select one: a. $205,000 b. $263,750 c. $295,280 d. $315,000 e. None of the above

Answer #1

(a) A firm wishes to third degree price
discriminate to meet competition in two markets A and B. The firm’s
total cost schedule is TC = $10*QA + $25*QB. Demands in the two
markets are QA = 4,000*PA-1.5 and QB =
100,000*PA-2. The profit-maximizing prices to charge in
markets A and B are:
A $20, $30.
B.
$30, $50.
C.
$40, $50
D.
$60,
$80
E. None of the above.
(b) Refer...

Suppose that a monopolist producing bicycles can divide the
aggregate demand into two groups: The domestic market and the
foreign market. The demand curve for the monopolist’s product in
the domestic market is y1=1200-10p1 and the
demand curve for the monopolist’s product in the foreign market is
y2=800-10p2. The monopolist’s total cost
function is given by C(y)= 50y where
y=y1+y2.
a) Assume that the monopolist does not practice price
discrimination. Calculate his/her profit-maximizing price-quantity
combination and the maximum profit.
b)...

A monopolist practices third degree price discrimination by
separating its customers into two groups: consumers under 65 and
senior citizens. Themonopolist’s marginal cost is MC = 0.05q, where
q is the total output in both markets. The marginal cost
does not depend on the market in which the goods are sold.The
demand curves are
! Adults: PA = 25 – 1/6 × QA = 25 –
0.1667 × QA
! Seniors: PS
= 15 – c × QS = 15 – 0.125 ×...

1.
Which is statement is true?
I. A single-price monopolist charges a price equal to the marginal
cost of the last unit sold.
II. A monopolist with positive marginal costs and facing a linear
demand curve always sets a quantity (or price) such that it sells
on the elastic section of the demand curve.
III. A monopolist regulated by marginal-cost pricing regulation
sells at a price that covers its variable and fixed costs of
production, but it still causes a...

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