Question
I need help with this problem. With the remote learning I am having a hard time understanding the problem. Please make sure to answer all
I need help with this problem. With the remote learning I am having a hard time understanding the problem. Please make sure to answer all parts and follow the hint on question b. Thank you
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According to their accountants there are two types of demand for Computer Services. One comes from businesses (more inelastic) and the other comes from families. The former is represented by the demand curve xB = 100 pB, where xB measures the hours of computer services that businesses purchase per week and pB is the price per hour charged to businesses. The families demand is given by xF= 15 pF /2, where xF and pFrepresent similar magnitudes. Computer services cost function is C(x) = x, where x = xB + xF.
(a) Suppose Computer Services can third-degree price-discriminate between the two groups. Calculate the hours of telephone services that it sells to each group, the two prices, and the total profits.
(b) Suppose the government of Computer Services forbids price discrimination. Then, the total demand for computer services is obtained from the horizontal sum of the demands from the two groups (businesses and families). Calculate the solution to the monopolist's problem and its profits. Is society better or worse off after this change is introduced? (Answer this question using consumers' and producer's surplus).
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