Exercise5

A monopolist faces the demand function

QD= 100-4p.

The monopolist has cost functionC(q) = 4q.

(1) If the monopolist can only charge one price to all of its consumers, determine the profit-maximizing output level and the monopolist's profits.

(2) The monopolist can pay a market research firm to identify the willingness to pay (for a unit of the good) of each consumer in the market. In this case, the monopolist is able to charge each consumer a price for the good that is equal to that consumer's willingness to pay for the product (i.e., the monopolist can perfectly price-discriminate.

(i) With this information, how much would the monopolist produce?

(ii) How much would the monopolist be willing to pay the market research firm for this information?