There is a monopolist and two groups of consumers, students and general consumers. The total demand...

 

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There is a monopolist and two groups of consumers, students and general consumers. The total demand of students is D₁ (p) = 10-p, while the total demand of general (non-student) consumers is D₂ (p) = 40-2p. The monopolist's (short-run) variable cost function is c(q) = 2q. Throughout this question, the monopolist uses linear pricing. (a) [5 marks] Discuss reasons why the demands of the two groups may be different. For the purpose of this question, assume that every consumer has unit demand. (Limited to 100 words.) (b) [15 marks] Let us assume that the monopolist sets the same price for both groups of consumers. The problem then becomes a monopolist's problem facing the market demand D₂ + D₂. Find the monopolist's optimal price, consumer surplus and producer surplus. (c) [20 marks] Now assume that the monopolist sets a price for students and a potentially different price for non- students. Find the optimal pricing, consumer surplus and producer surplus. (d) [5 marks] Explain why the monopolist needs to check student ID if he decides to use the pricing in (c). There is a monopolist and two groups of consumers, students and general consumers. The total demand of students is D₁ (p) = 10-p, while the total demand of general (non-student) consumers is D₂ (p) = 40-2p. The monopolist's (short-run) variable cost function is c(q) = 2q. Throughout this question, the monopolist uses linear pricing. (a) [5 marks] Discuss reasons why the demands of the two groups may be different. For the purpose of this question, assume that every consumer has unit demand. (Limited to 100 words.) (b) [15 marks] Let us assume that the monopolist sets the same price for both groups of consumers. The problem then becomes a monopolist's problem facing the market demand D₂ + D₂. Find the monopolist's optimal price, consumer surplus and producer surplus. (c) [20 marks] Now assume that the monopolist sets a price for students and a potentially different price for non- students. Find the optimal pricing, consumer surplus and producer surplus. (d) [5 marks] Explain why the monopolist needs to check student ID if he decides to use the pricing in (c).

Answer rating: 100% (QA)

a The demands of the two groups students and general consumers may differ due to several reasons 1 Price sensitivity Students being typically budgetco... View the full answer