Suppose a monopoly firm has a demand function given as Q=10-P and the cost function given...

 

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Suppose a monopoly firm has a demand function given as Q=10-P and the cost function given as C(Q) = 20. This information can be graphically illustrated as follows: Costs, revenues 10 6 I MR 4 I 8 2 AR = D Marginal Cost (MC) Q 2.2.1 With the aid of calculations, explain how this firm can use two-part pricing to extract all consumer surplus from the consumers. What will be the size of profit for a firm that is practicing two-part pricing? 2.2.2 Give two real-life examples where two-part pricing is applied. 2.2.3 With the aid of calculations, explain how this firm can use block pricing to extract all consumer surplus. What will be the size of profit for a firm that is practicing block pricing? (4) (4) (2) Suppose a monopoly firm has a demand function given as Q=10-P and the cost function given as C(Q) = 20. This information can be graphically illustrated as follows: Costs, revenues 10 6 I MR 4 I 8 2 AR = D Marginal Cost (MC) Q 2.2.1 With the aid of calculations, explain how this firm can use two-part pricing to extract all consumer surplus from the consumers. What will be the size of profit for a firm that is practicing two-part pricing? 2.2.2 Give two real-life examples where two-part pricing is applied. 2.2.3 With the aid of calculations, explain how this firm can use block pricing to extract all consumer surplus. What will be the size of profit for a firm that is practicing block pricing? (4) (4) (2)

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To explain how a monopoly can use twopart pricing to extract all consumer surplus with the aid of calculations we first need to understand what twopart pricing is Twopart pricing is a pricing strategy ... View the full answer