1) The market for polished North American elk ivory has two distinct groups of consumers: jewelers and collectors. Their demands are given by:

DJ (P) = 120 4P

DC (P) = 100 4P

A single taxidermist has cornered the market. He can act as a monopolist and has variable costs: VC(Q) = (Q^2)/2.

a) Calculate market demand.

b) Calculate marginal revenue for the monopolist assuming he can charge just one price.

c) What is his profit maximizing output and price?

d) Calculate CS for each group as well as PS and DWL.

e) Now suppose he can price discriminate by setting two prices; one for each group of consumers. What are his profit maximizing outputs and prices?

f) Repeat (d) at the prices and quantities from (e).

g) Who benefits and who is harmed by price discrimination? Is TS higher with price discrimination?