Answered: - Question: There are two groups of consumers who have inverse

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Answered: - Question: There are two groups of consumers who have inverse

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.]

(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)

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