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economics {o} Ncw assume instead that the phone service monopolist is selling monthly talk time to consumers. The monopolist's costs are zero. For simplicity assume

economics

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{o} Ncw assume instead that the phone service monopolist is selling monthly talk time to consumers. The monopolist's costs are zero. For simplicity assume there are only two consumers {you can think of these as two groups]. Consumer 1 is willing to pay $? for the first block of ED minutes. $5 for the second block of t] minutes, and $3 for the third block of ED minutes. Consumer 2 is willing to pay $5 for the first Bl} minutes. $3 for the second. and $1 for the third Neither consumer demands more than three blocks {130 minutes}. An swer the followinguestioni i. Suppose the monopolist can tell the consumers apart, can prevent arbitrage, and can offer each consumer a fixed patage for a fixed fee. What are the packages that the monopolist will offer to the two consumers? State quanties [numbers of talk time blodcs} and prices. What will be the monopolist's profit? {3 Marks} ii. Continue to assume that the monopolist can tell the consumers apart and can prevent arbitrage. but now suppose that it can no longer offer fixed packages or charge access fees. Instead, the monopolist must charge a constant price per talk time block for each consumer (however, different prices may be charged to the two consumers). What prices will the monopolist charge? What will he the monopolist's profit? {9 Marks}

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