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Consider a monopolist faces an inverse demand curve P(Q) = 256 - 2Q and a cost function C(Q) = 5Q Suppose the monopolist uses two

Consider a monopolist faces an inverse demand curve P(Q) = 256 - 2Q and a cost function C(Q) = 5Q

Suppose the monopolist uses two blocks in adeclining-block pricing scheme. It charges a highprice, P1, on the first Q1 units(the firstblock) and a lowerprice, P2, on the next Q2Q1 units.

Under nonuniform pricing: Calculate theprofit-maximizing values for Q1and Q2.

  • Quantity sold in the firstblock: ?
  • Quantity sold in the secondblock: ?

Under welfare implications (Calculate the change when the monopolist went from the uniform pricing model to a nonlinear pricing model with two blocks)

  • Change in social surplus: ?
  • Change in consumer surplus: ?

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