ECON 600 -MicroeconomicTheory

2. A monopolist sells output to two kinds of customers. Type 1 customers have an annual demand of: @,=60P Type 2 customers have an annual demand of: Q;=80P There are equallnumhers of each type. Assume there are no fixed costs and the marginal cost of the monopolist equals $20 (1.e.. (Q) = 20Q). (a) If the monopolist can separate the two types of customers by visual inspection and price discriminate, what 1s the monopolists optimal pricing policy? (b) What if the monopolist cannot discriminate, what price would the monopolist charge to maximize profits? (c) Now suppose the monopolist cannot separate customers by tvpe and price dis- criminate. Instead of charging a uniform price, the firm can impose a two-part tariff on its customers if 1t chooses. In other words, the firm charges a fixed fee of T dollars per customer and a price of P per unit of output. What 1s the monopolist's optimal pricing policy? Provide numerical values for I and P