Question
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
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 -3, while group 2's is -4. Your marginal cost of producing the product is $20.
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.
What are correct answers below
- At least one group has elasticity of demand less than one in absolute value.
- unanswered
- At least one group has elasticity of demand greater than 1 in absolute value.
- unanswered
- We are able to prevent resale between the groups.
- There are two different groups with different (and identifiable) elasticities of demand.
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