Hi!

How do you compute consumer surplus in monopolistic competition?

Here is the problem (I am stuck at the last question when I need to compute the consumer surplus): Price Discrimination I.A town is served by one mobile phone service provider that has sunk the infrastructure investment and now has a zero marginal cost of providing mobile phone services. There are two groups of customers: Customers from groupAuse cell phones only during working hours, whereas customers from groupBuse them at night. GroupA's demand for use of cell phones (in minutes per month) isDA(p) = 1000p, wherepis price per minute.B's demand isDB(p) = 400p.

1. (a)Suppose that the company charges uniform price per minutes irrespective of the time of the day. Find the price that maximizes the monopoly's profits, calculate number of minutes sold to each group, consumer surplus and producer surplus. take into account that the company could decide to charge a price above 400 at which B consumers would not buy anything.
2. (b)Now suppose that the company decides to offer two different tariff plans: one for working hours (with per minute pricepA), and one for nonworking hours (with pricepB). Find the pricespAandpBthat maximize profit. Compute the number of minutes sold to each group, consumer surplus and producer surplus.
3. (c)Compare the deadweight loss in (a) and (b). Compare profits in (a) and (b). Comment on the usefulness of price discrimination.
4. (d)Compute the elasticity of demand for each group at the equilibrium point. Is the price higher or lower for more elastic consumers.
5. (e)Suppose for half of their calls,Aconsumers use cell phones during working hours or
6. nonworking hours: they choose the cheapest option for half of their calls. Hence, if pA> pB,Aconsumers pay an average price(pA+pB)/2per minute for their calls, and their total demand isDA = ( pA+pB)/2, and it is split between night calls and working hours. Find the optimal pricing pricing strategy of the monopolist in this case. Compute her profit, and consumer surplus in groupsAandB. Compare to (a) and (b).

Thank you!!