Question: There are two groups of consumers who have inverse demands p1 =80 ? q1 and p2 = 60 ? 0.5q2. The monopolist has cost function C(q) = 20q.
(a) If the monopolist can choose a separate p1 and p2 for each group, what will they be?
(b) If the monopolist can only charge a single price, what will it be? Do both groups purchase? If so, how much does each group buy? [Hint: Add up demands, not inverse demands.]
(c) How do the prices p1 and p2 compare to the uniform price you found in part b?
(d) Does the monopolist prefer to set a separate p1 and p2, or does the monopolist prefer to set a single price?
(e) How much would group 1 consumers pay to have a ban on price discrimination?How much would group 2 pay? (Might be negative)
This question was answered on: Oct 07, 2020
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