Hello,

I was wondering if you can help me with this question.

A monopoly has the following total cost function:

TC 40Q

and faces the following demand function

P 200Q

a. Suppose that monopoly decides to practice 2nd degree price discrimination, as follows: it charges $180 for the first 20 units of output, $160 for the next 20 units, and $140 for the next 20 units. What are the profits of monopoly? What is consumer surplus? What is the deadweight loss?

Suppose that in addition to the above market (let's call it market A) with demand P A 200 Q A (from above), monopoly starts selling in another market (let's call this market B) with the following demand function: PB 80 4QB .

1. If monopoly considers the two markets combined (so it acts as a single-price monopoly), what quantity and what price does it charge? What are its profits?
2. Now suppose that monopoly practices third degree price discrimination. What quantity does it produce in each market and what price does it charge? What are its profits?