You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1's elasticity of demand is -5, while group 2's is -3. Your marginal cost of producing the product is $40.

a. Determine your optimal markups and prices under third-degree price discrimination.

Instructions:Enter your responses rounded to two decimal places.

Markup for group 1:

Price for group 1: $

Markup for group 2:

Price for group 2: $

b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.

• We are able to prevent resale between the groups.

• There are two different groups with different (and identifiable) elasticities of demand.

• At least one group has elasticity of demand greater than 1 in absolute value.

• At least one group has elasticity of demand less than one in absolute value.