Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please consider question Part B, including Q6 to Q11: PART B. Consider a utility monopoly that faces a linear demand curve for each consumer. All

Please consider question Part B, including Q6 to Q11:

image text in transcribedimage text in transcribed PART B. Consider a utility monopoly that faces a linear demand curve for each consumer. All consumers are identical with the following demand function: D(p)=90p. The number of consumers is irrelevant to your calculations. The monopolist has a constant marginal cost of $30. Suppose that the monopolist can quantity discriminate by setting two prices. That is, the monopolist will sell initial 20 units at a price of p1 per unit. And then if the consumer wants to purchase additional units, those will be sold at a lower price of p2 per unit. The monopolist sells a total of qT units. Q6. (3 points) What are the profit maximizing p1,p2, and qT ? Q7. (1 point) Draw the demand and the monopolist's marginal cost curves. Show on this graph p1,p2, and q2 that you found in Q6. Q8. (1 point) Calculate the consumer and the producer surpluses. Show them on the graph you have drawn for Now suppose that the monopoly cannot quantity discriminate. Q9. (1 point) What price, pM, does it charge and how many units, qM, does it produce? Q10. (1 point) Calculate the consumer and the producer surpluses. Q11. (0.5 points) Which produces a more efficient outcome: a monopolist which can quantity discriminate, or the same monopolist which cannot? Why

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions