A seller produces output with a constant marginal cost MC = 2. Suppose there is one group of consumers with the demand curve P1 = 16 - Q1, and another with the demand curve P2 = 10 - (1/2)Q2.
a) If the seller can discriminate between the two markets, what prices would she charge to each group of consumers?
b) If the seller cannot discriminate, but instead must charge the same price P1 = P2 = P to each consumer group, what will be her profit-maximizing price? c) Which, if any, consumer group benefits from price discrimination?
d) If instead P1 = 10 - Q1, does either group benefit from price discrimination?