Assume that a monopolist supplies goods to consumers located in two regions of the country. The...

 

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Assume that a monopolist supplies goods to consumers located in two regions of the country. The demand functions for the good in each region are Q₁ = 1- P₁ and Q₂ = 0.5 - P₂ Assume that there is no production and transportation cost. a) Assuming that the monopolist must charge a uniform (linear) price to the two regions, find the profit-maximizing uniform price. b) Assume that the monopolist can engage in third-degree price discrimination. Calculate the profit-maximizing price for each region. c) Does third-degree price discrimination increase or decrease welfare, as measured by the sum of consumers' plus producers' surplus, in this case? Is this general result when one compares uniform monopoly prices with third-degree price discrimination? Assume that a monopolist supplies goods to consumers located in two regions of the country. The demand functions for the good in each region are Q₁ = 1- P₁ and Q₂ = 0.5 - P₂ Assume that there is no production and transportation cost. a) Assuming that the monopolist must charge a uniform (linear) price to the two regions, find the profit-maximizing uniform price. b) Assume that the monopolist can engage in third-degree price discrimination. Calculate the profit-maximizing price for each region. c) Does third-degree price discrimination increase or decrease welfare, as measured by the sum of consumers' plus producers' surplus, in this case? Is this general result when one compares uniform monopoly prices with third-degree price discrimination?

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a To find the profitmaximizing uniform price we need to determine the monopolists total revenue and then subtract any costs since there are no product... View the full answer