Question: Question 2: Price Discrimination (13 mark) A monopolist's cost function is c (q) = q. There are two markets with demand curves Ph=7Qhandpi= 5QL. (i)

Question 2: Price Discrimination (13 mark) A monopolist's cost function is c (q) = q. There are two markets with demand curves Ph=7Qhandpi= 5QL. (i) Suppose the monopolist can distinguish the two markets and charges two different uniform prices in the two markets. What type of price discrimination strategy is this? Draw a diagram and use it to calculate the equilibrium prices, outputs, prots and the price elasticity of demand in the two markets. Explain why you see a higher price in one market than the other, using the measure of elasticity and Lerner index. (5 mark) Suppose the monopolist cannot distinguish the two markets. What type of price discrimination strategy will it practice and calculate the equilibrium outputs, pricing strategies and prots in the two markets. (8 mark)

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