New Friendland Telephone observes that there are two types of demand for telephone services. One comes...

 

 

Transcribed Image Text:

"New Friendland Telephone" observes that there are two types of demand for telephone services. One comes from businesses (more inelastic) and the other comes from families. The former is represented by the demand curve x, = 100- P, , where Xg measures the hours of telephone services that businesses purchase per week and Pe is the price per hour charged to businesses. The families demand is given by x, = 15- P. /2 , where xF and pf represent similar magnitudes. "New Friendland Telephone" cost function is C(x) = x, where x = x; +Xp (a) Suppose "New Friendland Telephone" can price-discriminate between the two groups. Calculate the hours of telephone services that it sells to each group, the two prices and the total profits. (b) Suppose the government of New Friendland forbids price discrimination. Then, the total demand for telephone services is obtained from the horizontal sum of the demands from the two groups (businesses and families). Calculate the solution to the monopolist's problem and its profits. Is society better or worse off after this change in introduced? "New Friendland Telephone" observes that there are two types of demand for telephone services. One comes from businesses (more inelastic) and the other comes from families. The former is represented by the demand curve x, = 100- P, , where Xg measures the hours of telephone services that businesses purchase per week and Pe is the price per hour charged to businesses. The families demand is given by x, = 15- P. /2 , where xF and pf represent similar magnitudes. "New Friendland Telephone" cost function is C(x) = x, where x = x; +Xp (a) Suppose "New Friendland Telephone" can price-discriminate between the two groups. Calculate the hours of telephone services that it sells to each group, the two prices and the total profits. (b) Suppose the government of New Friendland forbids price discrimination. Then, the total demand for telephone services is obtained from the horizontal sum of the demands from the two groups (businesses and families). Calculate the solution to the monopolist's problem and its profits. Is society better or worse off after this change in introduced?

Answer rating: 100% (QA)

a Xb100pb Xf15pf2 cxx where xXbXf BPXCX 100XBXB XBXF 100X... View the full answer