1. New Friendland Telephone observes that there are two types of demand for telephone services. One comes from businesses (more inelastic) and the other
1. \" New Friendland Telephone\" observes that there are two types of demand for telephone services. One comes from businesses (more inelastic) and the other comes from families. The former is represented by the demand curve 333 = 100 p3, where 333 measures the hours of telephone services that businesses purchase per week and 133 is the price per hour charged to businesses. The families demand is given by 33F = 15 PF/2, where 331: and pp represent similar magnitudes. \" New Friendland Telephone\" cost function is C(m) = a", where a," = 37 B + :1: F. (a) Suppose \" New Friendland Telephone\" can third-degree price-discriminate between the two groups. Calculate the hours of telephone services that it sells to each group, the two prices, and the total prots. (b) Suppose the government of New Friendland forbids price discrimination. Then, the total demand for telephone services is obtained from the horizontal sum of the demands from the two groups (businesses and families). Calculate the solution to the monOpolist's problem and its prots. Is society better or worse off after this change is introduced? (Answer this question using consumers' and producer's surplus)
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