Question: 1. A monopolist faces a market split evenly between high valuation consumers with in dividu al inverse demand PH = 20 YH and low

1. A monopolist faces a market split evenly between high valuation consumers with in dividual inverse demand Ph = 20 - YH and

1. A monopolist faces a market split evenly between high valuation consumers with in dividu al inverse demand PH = 20 YH and low valu ation consumers with individual inverse demand PL = 16 2yL For convenience, suppose the firm has a margin al cost equal to zero. Moreover, arbitrage is not possible. (a) (15 points) Assume the firm cannot observe group st atus (i.e., cannot identify if a customer has a high or low valuation). Determine the firm's best second-degree pricing scheme. Show this outcome on a graph and explain why your answer is the best strategy for the firm. (b) (5 points) Is the market outcome in part (a) Pareto efficient? If not, calculate the dead weight loss. (c) (15 points) How will your answer in part (a) change if the low valuation customers have an inverse demand given by PL = 4 - 2yL? Fully explain your answer.

Step by Step Solution

★★★★★

3.33 Rating (156 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

A monopolist faces two market segments. In each market segment, the demand curve is of the constant elasticity form. In market segment 1, the price elasticity of demand is -3, while in market segment...

A monopolist faces a market demand curve given by Q = 70 P: The monopolists marginal revenue function is given by MR = 70 2Q: a. If the monopolist can produce at constant average and marginal costs...

Suppose the firm has only three possible scales of production as shown below: a. Which scale of production is most efficient when Q = 65? b. Which scale of production is most efficient when Q = 75?...

A monopolist faces a market split evenly between high valuation consumers with individual inverse demand PH = 20 yH and low valuation consumers with individual inverse demand PL = 16 2yL For...

3. (35 points) A monopolist faces a market evenly split between high valua- tion consumers, with individual demand funection P =10y" (6) and low valuation consumers with individual demand function...

BACKGROUND An SM bond is a 35-year Australian government bond with a face value of $1. They are marketed to consumers saving for retirement (who buy the S part) and investors (who buy the M part)....

1.With reference to the Staple and Heinz-Beech Nut cases, discuss the central issues of the anticompetitive arguments. Carefully discuss the circumstances under which mergers may be undesirable and...

Requested to do an integrated summary of these paper by reflecting to the local (Malaysian) Corporate Financial Scenarios. Three views on stock markets and corporate behavior: Tobin, Veblen, and Marx...

SEE "DOCUMENT 1" FOR CRITERIA 2 "DOCUMENT 2" FOR CRITERIA 4. You are to write a 2 to 4 page paper following APA rules for the title page, citations and appropriate references within the body of the...

Questions: 1. Identify the key criteria and considerations that need to be taken into account in evaluating BFSI entry in the proposed foreign markets. 2. Of the countries under consideration, which...

Worth H. Percivil, a mechanical engineer, was employed by General Motors (GM) for twenty-six years until he was discharged. At the time his employment was terminated, Percivil was head of GMs...

In your own words, explain the difference between the inventory of a merchandising and manufacturing company and the reasons for it. Then, describe the types of inventory (i.e., raw materials, etc.)...

Which of the following accounting codes are considered champions for rules - based standards? ( Select two ) a . Ohartered Financial Institute / Analyst Association ( CFAUCFA ) b . International...

Financial fraud occurs because systems of regulation are costly to administer and markets can never be fully efficient. Using illustrative case studies of your choice, evaluate the effectiveness or...

Three sky-jumpers attempt independently of each to land on a straight line on the ground marked ABC, where B is the half-way point of the line AC. Each jumper is able to land somewhere on the line...

Derive the transfer function H(s)/Q(s) for the liquid-level system of Fig. P5-1 when (a) The tank level operates about the steady-state value of hs = 1 ft (b) The tank level operates about the...

An apartment project has an NOI of $135,600, receivable in relatively equal monthly installments. It can be purchased today and almost certainly flipped to the local university in exactly one year,...

Sundance Dairy has 200 quarts of whole milk containing 6% butterfat How many quarts of low fat milk containing 1.5% butterfat should be added to produce milk containing 2.4% butterfat

Let's imagine we are looking at the stomach. How would a buffer with a pH of 5 act if it were placed in the stomach acid, with a pH of 2? Please check all that apply. pH Scale Question 23Answer a....

1. A monopolist faces a demand curve = 120 2 and has costs given by () = 20 + 100. 91.1. Write the monopolist's profits in terms of the price it charges. 91.2. Use the derivative (w.r.t. price) to...

Questions UNIvsRsrrv AT ALa-mv, STATE UNIvERer'v ca New Year: DEPARTMENT oF Econcmcs PhD. l'-'re1imina.r1_,.r Examination in Microeconomics, August 20, 201E! Instructions: Answer any three of the...

1. A monopolist faces the following demand curve: P = 1200 - 3Q, its total cost is given by: TO = 500 + Q2. If it is a non-discriminating (one price for all) monopolist, what is its profit maximizing...

1. A monopolist faces a consumer demand Q (p) = 1000-2p, and has a total cost function of C(q) = 2q2 + FC. (a) Solve for the profit-maximizing output for this monopolist. (b) Solve for the value of...

1) A monopolist faces a demand curve Q = 400 - 5P and has the total cost curve TC(Q) = 250 + 15Q + 0.5Q2 . What is the monopolist's marginal revenue and marginal cost? What is the profit-maximizing...

1. A monopolist faces a market split evenly between high valuation consumers with individual inverse demand PH = 20 yH and low valuation consumers with individual inverse demand PL = 15 3yL For...