Question
A monopolist sells a product with zero marginal cost of production. She has two types of customers: group 1 are students (with a student ID)
A monopolist sells a product with zero marginal cost of production. She has two types of customers: group 1 are students (with a student ID) and group 2 are non-students. The individual demand of customers in group 1 is q1=10p while the individual demand of customers in group 2 is q2=15p. The nature of the product ensures that there can be no arbitrage. Which of the following statements is true? A. The optimal price per unit for group 1 is p1=$5. B. The optimal price per unit for group 2 is p2=$7.5 C. This is an example of 3rd degree price discrimination. D. All of the above. E. Only (a) and (c).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started