Question: A monopoly firm faces two consumers; one whose demand is Q1 = 8 - P. The other's demand is Q2 = 16-2P. The firm

A monopoly firm faces two consumers; one whose demand is Q1 = 8 - P. The other's demand is Q2 = 16-2P. The firm has zero costs C(Q) = 0. You may want to graph demand. a. Derive (points for steps) the firm's profit-maximizing price if it cannot price discriminate. Label it P1. b. Given the price in a, derive the profit-maximizing fixed fee the firm could charge and explain why (participation constraint) it works. Label it F1. c. What is the net consumer surplus of each consumer with {P1, F1} d. Let your answers in a and b (i.e., (P1, F1}) be one two-part offer from the firm. Given this derive the optimal second two-part tariff (price and fixed fee, P2, F2) the firm would set and explain why the high-demand consumer takes this offer instead. 50

Step by Step Solution

★★★★★

3.37 Rating (141 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Answer a When the price discrimination is not there then I have combined the demand equations 20 2P ... View full answer

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 Chemistry Questions!

Provide one reason as to why you may want to borrow from the cash value of your permanent insurance policy.

Consider each pair of bases, and select which one is more basic. You may want to draw their conjugate acids, and think about which one is a stronger acid. (a) (c) -C=C: H (d) OH CEN:

Perform a Horizontal Analysis You may want to type out your financials to make it easier to perform this analysis Make sure you have a copy of your financial statements for 3 years attached to this...

On Monday mornings, the First National Bank only has one teller window open for deposits and withdrawals. Experience has shown that the average number of arriving customers in a four-minute interval...

Henderson Window Company was a privately held corporation until January 1, 2011. On January 1, 2011, Cool Glass Company acquired a 70% interest in Henderson at a price well in excess of book value....

A standard deck of cards is being used to play a game. There are four suits (hearts, diamonds, clubs, and spades), each having 13 faces (ace, 2, 3, 4, 5, 6, 7, 8, 9, 10, jack, queen, and king),...

Albatross Airlines has a monopoly on air travel between Peoria and Dubuque. If Albatross makes one trip in each direction per day, the demand schedule for round trips is q = 1602p, where q is the...

A: Now consider the same set-up as in exercise 13.7 but assume throughout that labor is instantaneously variable, that capital is fixed in the short run and variable in the intermediate run, and that...

Suppose that the demand curve for a product x provided by a monopolist is given by p = 90x and suppose further that the monopolists marginal cost curve is given by MC = x. A: In this part, we will...

In Chapter 22, we worked with models in which high and low cost customers compete for insurance. Consider the level x of health insurance that consumers might choose to buy, with higher levels of x...

Describe ansoff matrix?

2. (6 points) In a sample of 821 households in Morocco, the volume of water consumed in a week was 334 liters with a standard deviation of 591 liters. Test that the average volume of water consumed...

Consider a company founded with 1m shares of common equity, split amongst the founders. A year later the company raises $5M of Series A funding at a $10M pre-money valuation. After the money has gone...

Your aunt's fasting sugar level is 130, so the doctor wants her to see a nutritionist to help her eat a more healthy diet. The mean blood sugar level is 84 with a standard deviation of 23. Interpret...

Your company estimates that 5% of this month's $100,000 Sales on account will eventually be written off. The entry should be: Debit Bad Debt Expense, $5,000; Credit Bad Debt Allowance, $5,000 Debit...

Suppose we want to figure out what the biggest magnitude earthquake was in 2019, but we only have our representative sample of 200. Let's see if trying to find the biggest magnitude in the population...

You observe the following information: The variance of portfolio X is 0.25; the market portfolio's variance is 0.04; the covariance between portfolio X and the market is 0.09. Compute the CAPM beta...

Several months have passed and the Managing Partner approved and properly filed the Complaint and properly submitted the Request for Production of Documents that you drafted. In fact, it has been 75...

The following activities are part of a project to be scheduled using CPM: a. Draw the network. b. What is the critical path? c. How many weeks will it take to complete the project? d. How much slack...

What was the most complex project that you have been involved in? Give examples of the following as they pertain to the project: the work breakdown structure, tasks, subtasks, and work package. Were...

Discuss ways to use lean to improve one of the following: a pizza restaurant, a hospital, or an auto dealership.

A sample size must be determined for estimating a population mean given that the confidence level is 90% and the desired margin of error is 0.30. The largest value in the population is thought to be...

Determine the smallest sample size required to estimate the population mean under the following specifications: a. e 2.4, confidence level 80%, data between 50 and 150 b. e 2.4, confidence level ...

The manager at a new tire and repair shop in Hartford, Connecticut, wants to establish guidelines for the time it should take to put new brakes on vehicles. In particular, he is interested in...