Suppose the demand functions facing the wireless telephone monopolist in Worked-Out Problem 18.4 (page 647) are

QdL=60−100PQLd=60−100P

for each low-demand consumer and

QdH=200−100PQHd=200−100P

for each high-demand consumer, where P is the per-minute price in dollars. The marginal cost is $0.20 per minute. Suppose the monopolist offers only a single two-part tariff.

a. What will be the monopolist's profit from each type of consumer if it charges a per-minute price of $0.20 and a fixed fee that causes both types of consumers to make a purchase?

Profit_low = $.

Profit_high= $.

b. What if it charges a per-minute price of $0.30?

Profit_low = $.

Profit_high= $.

c. If there are 100 high-demand consumers, how many low-demand consumers can there be for the monopolist to find the $0.30 price more attractive than the $0.20 price?

low-demand consumers.

Answer rating: 100% (QA)

a Profit low 6 Pro... View the full answer