Question
4. American Airlines is a monopolist flying from Washington National to Charlotte. Suppose that there are 20,000 potential customers with valuations uniformly distributed between $0
4. American Airlines is a monopolist flying from Washington National to Charlotte. Suppose that there are 20,000 potential customers with valuations uniformly distributed between $0 and $1000. A passenger will fly if her valuation is more than AA's price. a. How many seats will AA sell if it sets a single price of $550? b. equation for AA's demand curve. If marginal cost is $100, what is the profit-maximizing price and quantity? What is consumer surplus and total welfare? c.
5. Suppose that AA can perfectly price discriminate. Using the specification in Q4, What is the profit- maximizing quantity now? What is consumer surplus and total welfare?
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