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Consider a monopoly that uses the 3rd-degree price discrimination for two groups of consumers with the same inverse demand functions, P1(q) = P2(q) for all
Consider a monopoly that uses the 3rd-degree price discrimination for two groups of consumers with the same inverse demand functions, P1(q) = P2(q) for all q. The monopoly has the total cost function C(q1,q2) = C1(q1) + C2(q2). Suppose that the profit-maximizing quantities are positive, q m 1 > 0 and q m 2 > 0. Are the optimal prices for different groups always equal, that is, p m 1 = p m 2? Explain.
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