4. Alset produces electric cars, which have short range or long range. There are 100 drivers who are "Commuters" and 100 who are "Travelers." Their reservation prices are as follows: Short Range Long Range 49,000 Commuters 30,000 Travelers 40,000 95,000 Marginal cost is equal to 10,000 for cars with short and long range both. Alset knows the distribution of reservation prices but does not know the reservation prices of any individual driver. (i) Suppose that Alset sells one type of car and employs linear pricing. Which type will it sell and what will the price be. (ii) Find the optimal prices under second-degree price discrimination. (iii). Is profit higher in (i) or (ii)? Is social surplus higher in (i) or (ii)?

4. Alset produces electric cars, which have short range or long range. There are 100 drivers who are "Commuters" and 100 who are "Travelers." Their reservation prices are as follows: Short Range Long Range 49,000 Commuters 30,000 Travelers 40,000 95,000 Marginal cost is equal to 10,000 for cars with short and long range both. Alset knows the distribution of reservation prices but does not know the reservation prices of any individual driver. (i) Suppose that Alset sells one type of car and employs linear pricing. Which type will it sell and what will the price be. (ii) Find the optimal prices under second-degree price discrimination. (iii). Is profit higher in (i) or (ii)? Is social surplus higher in (i) or (ii)?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter11: Monopoly And Antitrust Policy

Section: Chapter Questions

Problem 6SCQ: Urban transit systems, especially those with rail systems, typically experience significant...

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