Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Suppose there are two groups of consumers: high demand (1) and low demand (2). Inverse demands are p = 12 - q1, 0 <

1. Suppose there are two groups of consumers: high demand (1) and low demand (2).

Inverse demands are

p = 12 - q1, 0 < p < 12

p = 8 - q2, 0 < p < 8

a) Suppose that the monopolist charges a uniform price on the integrated market and that his marginal cost is c = 0. Find price, quantity sold, consumer surplus and monopolist's profit. Compute the social welfare (sum of consumer surpluses and profits.)

b) Now assume that the monopolist can price discriminate between the market segments. Find the prices and quantities for the low demand and the high demand market. Show that welfare goes down with price discrimination.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics The Basics

Authors: Michael Mandel

2nd Edition

0073523186, 9780073523187

More Books

Students also viewed these Economics questions