4. (a) A discriminating monopolist can separate his consumers into two distinct markets with the following...
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4. (a) A discriminating monopolist can separate his consumers into two distinct markets with the following demand functions: Market I: Q=16-0.2P, Market II: Q-180-2P2 Assume that the monopolist's total cost function takes the form TC+20Q-20=0, Where Q (=Q,+Q) is the total output. Obtain the total profit function and determine the prices he would charge in the two markets to maximise profits. What is the total profit? Do you agree that the price charged in the market with a higher elasticity of demand would be higher? Show it by calculations. (b) Calculate the ratio of prices charged by a discriminating monopolist in the two markets with price elasticities of demand equal to 3.0 and 1.5. 4. (a) A discriminating monopolist can separate his consumers into two distinct markets with the following demand functions: Market I: Q=16-0.2P, Market II: Q-180-2P2 Assume that the monopolist's total cost function takes the form TC+20Q-20=0, Where Q (=Q,+Q) is the total output. Obtain the total profit function and determine the prices he would charge in the two markets to maximise profits. What is the total profit? Do you agree that the price charged in the market with a higher elasticity of demand would be higher? Show it by calculations. (b) Calculate the ratio of prices charged by a discriminating monopolist in the two markets with price elasticities of demand equal to 3.0 and 1.5.
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a Total demand Q Q1 Q2 1602P1 1802P2 Total cost TC 20Q 20 Total revenue TR ... View the full answer
Related Book For
Industrial Organization Markets and Strategies
ISBN: 978-1107069978
2nd edition
Authors: Paul Belleflamme, Martin Peitz
Posted Date:
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