Question 1: In the island nation of Baldonia, the camera maker Minoldak has a monopoly in the market for film cameras. This market consists of two types of consumers, group 1 and group 2, each with different maximum willingness-to-pay for a film camera. Specifically, the willingness-to-pay is given by the following table: Maximum willingness-to-pay for film cameras ($ Consumer of Group 1 200 Consumer of Group 2 500 Each group consists of 100 (identical) consumers, each of whom will buy, at most, one camera. Minoldak's marginal cost of producing an extra camera is equal to $50, independent of the number of cameras sold. a. What is Minoldak's profit-maximizing price and quantity of film cameras if it cannot price discriminate? Profit-maximizing price for film cameras Profit-maximizing quantity of film cameras sold b. Minoldak now considers a strategy of issuing mail-in rebates. It will sell its cameras at a "full" price, but then will offer a rebate to any customer that mails in a "proof of purchase" card. Group 2 consumers are "time-famined" and would never consider mailing in a proof of purchase, while Group 1 consumers would take the time to apply for the rebate (and they correctly anticipate this at the time they make a decision to buy a camera). What is the profit- maximizing full-price for a camera, and what is the profit-maximizing rebate amount? Profit-maximizing "full" price for film cameras Profit-maximizing rebatec. Let's change the story (in particular, ignore part (b)!) Suppose now that Minoldak starts selling a second type of camera: digital cameras. Minoldak has the monopoly over digital cameras as well, and the marginal cost of making a digital camera equals $50, and is independent of the volume of cameras produced. 100 consumers (Group D) prefer digital cameras over film cameras, while another 100 (Group F) prefer film cameras. The willingness-to-pay of a typical consumer of each type is given in the following table. Maximum willingness-to-pay for Maximum willingness-to-pay for digital cameras ($) film cameras ($) Consumer of Group D 500 200 Consumer of Group F 200 500 What is Minoldak's profit-maximizing price for each type of camera? (Note: Minoldak can set different prices for the two types of cameras, but it cannot charge different prices based on the identity of the consumer) Profit-maximizing price for digital cameras Profit-maximizing price for film cameras d. Let's consider pairs of prices that Minoldak might choose. What are the quantities of film cameras and digital cameras sold if Minoldak sets a price of a film camera equal to $150 and the price of a digital camera equal to $400? Quantity demanded of film cameras =Quantity demanded of digital cameras = What are the quantities of film cameras and digital cameras sold under the assumption that if Minoldak sets a price of a lm camera equal to $75 and the price of a digital camera equal to $400? Quantity demanded of lm cameras = Quantity demanded of digital cameras = Suppose that another firm, Leikon, enters the market of digital cameras (but not the market for lm cameras). Leikon's marginal cost is constant and equals $50. The two rms choose prices simultaneously and independently, once for all. Consumers perceive the two manufacturers' digital cameras as perfect substitutes. What are the equilibrium prices? Leikon's price for digital cameras = Minoldak's price for digital cameras = Minoldak's price for lm cameras = Suppose that, after the entry of Leikon into the digital camera market, Minoldak gets an opportunity at exiting the digital camera market. What are the equilibrium prices (simultaneously, independently and once for all) set by each rm if Minoldak exits the digital camera market? Leikon's price for digital cameras = Minoldak's price for lm cameras = Based on the previous questions, should Minoldak exit the digital market