QUESTION 2 (CLO 1) Jolly Round Island has the possibility of discriminating its visitors between Group A and Group B. The demand functions for the two groups are as follows: Group A: PA = 21 - 0.1QA Group B: PB = 50 - 0.4QB The firm's total cost function is represented by: TC = 1000 + 8Q, where Q = QA +QB i. If the monopoly practices third-degree price discrimination, calculate the profit-maximising price and output in each market. (5) ii. Calculate the price elasticity of demand for each market. Explain the relationship between price elasticity of demand and the price differential in these two markets. (5) iii. Why do firms practice price discrimination? Give two examples of price discrimination