12) Suppose that a monopolist supplies a product in two distinct markets, LA and NY. The demand functions for the two markets are Pla = 65 – 3QLA and PNY = 50 – 5QNY. The monopolist has a fixed cost of $10 and a constant marginal cost of $5 per unit. a. If segmenting is feasible, what are the profit-maximizing prices, quantities, and maximized profit? b. If segmenting is NOT feasible, what is the profit-maximizing price, quantity, and maximized profit? c. How much is the difference in total consumer surplus in the two cases? Which case makes consumers better off?
12) Suppose that a monopolist supplies a product in two distinct markets, LA and NY. The demand functions for the two markets are Pla = 65 – 3QLA and PNY = 50 – 5QNY. The monopolist has a fixed cost of $10 and a constant marginal cost of $5 per unit. a. If segmenting is feasible, what are the profit-maximizing prices, quantities, and maximized profit? b. If segmenting is NOT feasible, what is the profit-maximizing price, quantity, and maximized profit? c. How much is the difference in total consumer surplus in the two cases? Which case makes consumers better off?
Chapter8: Monopoly
Section: Chapter Questions
Problem 7SQP
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Transcribed Image Text:12) Suppose that a monopolist supplies a product in two distinct markets, LA and NY. The demand
functions for the two markets are PLa = 65 – 3QLA and Pvy = 50 – 5QNY. The monopolist has a fixed cost of
$10 and a constant marginal cost of $5 per unit.
a. If segmenting is feasible, what are the profit-maximizing prices, quantities, and maximized profit?
b. If segmenting is NOT feasible, what is the profit-maximizing price, quantity, and maximized profit?
c. How much is the difference in total consumer surplus in the two cases? Which case makes consumers
better off?
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