Consider the case of a monopolist who has the ability to perfectly price discriminate by charging each one of its customers a two-part tariff. Suppose for simplicity that there are only two consumers, Mary and Terry. Mary demand for the good is 2/3 of the aggregate demand. The aggregate demand is given by Q=550-3p, where Q denotes the total quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 5 Q + 100 Find the two-part tariff that the firm will charge Mary in order to maximize its profit. Then enter the fee of this two-part tariff below. (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)
Consider the case of a monopolist who has the ability to perfectly price discriminate by charging each one of its customers a two-part tariff. Suppose for simplicity that there are only two consumers, Mary and Terry. Mary demand for the good is 2/3 of the aggregate demand. The aggregate demand is given by Q=550-3p, where Q denotes the total quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 5 Q + 100 Find the two-part tariff that the firm will charge Mary in order to maximize its profit. Then enter the fee of this two-part tariff below. (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
Related questions
Question
Transcribed Image Text:Consider the case of a monopolist who has the ability to perfectly price discriminate by charging each one of its
customers a two-part tariff. Suppose for simplicity that there are only two consumers, Mary and Terry. Mary demand for
the good is 2/3 of the aggregate demand. The aggregate demand is given by Q=550-3p, where Q denotes the total
quantity demanded at price p. The firm's total cost of producing Q units is given by the function
C(Q) = 5 Q + 100
Find the two-part tariff that the firm will charge Mary in order to maximize its profit.
Then enter the fee of this two-part tariff below.
(As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning