2. Consider a monopolist who has a cost function of c(Q) = 5Q. This monopolist faces two consumers, the first having demand q₁(P₁) = 80 - 2P₁ and the second having demand q₂(P₂) = 50-P₂- a) Calculate the profit-maximizing price and then the optimal quantity sold to each consumer under uniform pricing, i.e. the monopolist charges the same price for both consumers. What are the monopolist's profits? b) Suppose now that the monopolist can engage in third degree price discrimination. Find the monopolists profit maximizing prices for consumers 1 and 2 (they should be different), and calculate the monopolist's profits. How do they compare to the profits in part (a)?
2. Consider a monopolist who has a cost function of c(Q) = 5Q. This monopolist faces two consumers, the first having demand q₁(P₁) = 80 - 2P₁ and the second having demand q₂(P₂) = 50-P₂- a) Calculate the profit-maximizing price and then the optimal quantity sold to each consumer under uniform pricing, i.e. the monopolist charges the same price for both consumers. What are the monopolist's profits? b) Suppose now that the monopolist can engage in third degree price discrimination. Find the monopolists profit maximizing prices for consumers 1 and 2 (they should be different), and calculate the monopolist's profits. How do they compare to the profits in part (a)?
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.5P
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Solve Only part a .......
Transcribed Image Text:2. Consider a monopolist who has a cost function of c(Q) = 5Q. This monopolist faces two
consumers, the first having demand q₁(P₁) = 80 - 2P₁ and the second having demand q₂(P₂) =
50-P₂-
a) Calculate the profit-maximizing price and then the optimal quantity sold to each consumer
under uniform pricing, i.e. the monopolist charges the same price for both consumers. What are
the monopolist's profits?
b) Suppose now that the monopolist can engage in third degree price discrimination. Find the
monopolists profit maximizing prices for consumers 1 and 2 (they should be different), and
calculate the monopolist's profits. How do they compare to the profits in part (a)?
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