There are two distinct groups of customers in the market for a firm's product. Their inverse demand

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There are two distinct groups of customers in the market for a firm's product. Their inverse demand curves are \(p_{1}=5-Q_{1}\) and \(p_{2}=10-Q_{2}\). The monopoly's constant marginal cost of production is zero.

a. If the monopoly can price discriminate, what is its total profit?

b. If the monopoly cannot prevent resale and the monopolist charges a uniform price, will it charge the higher price for Group 2's customers or the lower price for Group 1's customers to maximize total profit? What happens to consumer surplus if the monopolist charges the higher price for Group 2's customers?

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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