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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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