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1. (40 points) Suppose the a monopolist serves two markets. Market 1 is characterized by the inverse demand function P = 204(}, and market 2
1. (40 points) Suppose the a monopolist serves two markets. Market 1 is characterized by the inverse demand function P = 204(}, and market 2 is characterized by P = 20-2(),. The monopolist's marginal cost is constant and is equal to 4. (a) (b) (c) (d) (10 points) What is the monopolist's profit maximizing price when treating the two markets as one market? At this price how much is the monopolist selling in each market? (10 points) Now, suppose the monopolist carried out third-degree price discrimina- tion in these markets. What prices will he/she charge in each market? (10 points) Instead of third degree price discrimination suppose the monopolist wanted to carry out firsf-degree price discrimination. Provide a pricing scheme that allows the monopolist to do this. (10 points) Now, suppose the monopolist is not aware of which of his customers belongs to market 1 and which belong to market 2. In this case, is the pricing scheme vou have derived above incentive compatible? Show, why or why not. 2. (10 points) Two markets, A and B, are characterized by the inverse demand functions P= X4Qqand P = Xg (Jp, where Xg > X4. Suppose a monopolist operates in these markets and carries out second-degree price discrimination. Which set of cus- tomers will not get any positive consumer surplus from pricing scheme of the monopolist? Explain vour
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