Question
Consider a second-degree price-discriminating monopolist who faces an inverse demand curve given by P(Q) = 197 - 2Q and has a cost function given by
Consider a second-degree price-discriminating monopolist who faces an inverse demand curve given by P(Q) = 197 - 2Q and has a cost function given by C(Q) = 1Q- + 10Q. Suppose the monopolist uses two blocks in a declining-block pricing scheme. It charges a high price, P, , on the first Q, units (the first block) and a lower price, P2, on the next Q2 - Q1 units. Calculate the profit-maximizing values for P,, P2, Q,, and Q2. Do not round intermediate values and submit your answers rounded to two digits. Quantity sold in the first block: . Total quantity sold: Prices charged. In the first block: In the second block: Now suppose that the economist that had estimated the cost function receives new data that suggests that a constant marginal cost function is more appropriate for this monopolist. The cost function is better estimated as C(Q) = 10Q. How does this change the values Q, and Q2 relative to your answers in the previous part of the question? Do not round intermediate values and submit your answers rounded to two digits. Change in Q1 : Change in Q2:
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