Question
.A monopolist firm produces a special soft drink. There are 20 H-type and 40 L-type consumers with the following demand functions: PH = 16 -
.A monopolist firm produces a special soft drink. There are 20 H-type and 40 L-type consumers with the following demand functions:
PH = 16 - QH PL = 12 - QL (Note that these are individual-level demand functions.)
The marginal cost of producing 1 unit of product is $4.
The firm knows that there are 2 types of consumers but cannot identify who is who. The firm can sell its products either in single units, or can pack them (4-unit pack, 6-unit pack, etc.).
a) Write the profit function for the monopolist firm (with restrictions, if any).
b) What is the best pricing and packing policy for the monopolist firm?
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