Question 4 A monopolist has two sets of customers. The inverse demand for Group 1 is described by P = 200-Q, where P represents the Price and Q represents the quantity. For Group 2 the inverse demand is P = 200-2Q. The monopolist faces constant marginal cost of 40. a. Show the monopolist's total demand, if the two markets are treated as one. b. Show that the monopolist profit maximising price is P = 120 if both groups are to be charged the same price. At this price how much is sold to members of Group 1 and how much to members of Group 2?

Question 4 A monopolist has two sets of customers. The inverse demand for Group 1 is described by P = 200-Q, where P represents the Price and Q represents the quantity. For Group 2 the inverse demand is P = 200-2Q. The monopolist faces constant marginal cost of 40. a. Show the monopolist's total demand, if the two markets are treated as one. b. Show that the monopolist profit maximising price is P = 120 if both groups are to be charged the same price. At this price how much is sold to members of Group 1 and how much to members of Group 2?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter25: Monopoly

Section: Chapter Questions

Problem 14E

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