Problem 3 - A monopolist sells its product to 5000 consumers. Each of these consumers has a utility function of the form: u(x, m) = kx − x² + m, where x is the quantity of the good consumed, m is money left over and k is a parameter that can take different values: 1000 consumers have k = 4, another 1000 have k = 5 and 3000 have k : 6. Initially, each consumer has 100€ that he may spend. The marginal cost of producing this good is 1€. = 1. The monopolist sets a price of p per unit that it charges to every consumer. What price maximizes the firm's profit? How much profit does the firm make?

Problem 3 - A monopolist sells its product to 5000 consumers. Each of these consumers has a utility function of the form: u(x, m) = kx − x² + m, where x is the quantity of the good consumed, m is money left over and k is a parameter that can take different values: 1000 consumers have k = 4, another 1000 have k = 5 and 3000 have k : 6. Initially, each consumer has 100€ that he may spend. The marginal cost of producing this good is 1€. = 1. The monopolist sets a price of p per unit that it charges to every consumer. What price maximizes the firm's profit? How much profit does the firm make?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter12: More Realistic And Complex Pricing

Section: Chapter Questions

Problem 3MC

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