A monopolist faces two separate markets with the demand curves given as D 1 (p 1 )
Question:
A monopolist faces two separate markets with the demand curves given as
D1(p1) = y1 = 100− p1
D2(p2) = y2 = 100−2 p2
with D1 = y1 and D2 = y2 giving the quantities and p giving the price on the market. Let the monopolist’s costs be given as C(y) = 20y.
1) Assume that the monopolist can price discriminate the market into two markets, by charging a different price in each market, according to the third-degree price discrimination
a) Write down the specific revenue functions R1(y1) for the first market and R2(y2) for the second market.
b) Write down the specific marginal revenue functions MR1(y1) for the first market and MR2(y2) for the second market.
c) What are the profit-maximizing quantities and prices on the markets? Do they differ in both markets? Interpret your answer economically.
2) Evaluate the monopoly, and perfect competitive markets in terms of efficiency with an explanation.