Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are: Q1 = 300 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.4P3 and Q4 = 75 – 0.25P4. Assume further that the total cost of the firm is given as TC = 65,000 – 100Q. As an economic adviser you are required to determine: The prices to be charged in the four markets and the amount of output to be sold in each market so that total profits can be maximized. Calculate the total profit to be made from the strategy of price discrimination. Explain what would have happened if this monopolist did not implement this strategy of price discrimination. Elasticities in each market and comment.
Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are: Q1 = 300 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.4P3 and Q4 = 75 – 0.25P4. Assume further that the total cost of the firm is given as TC = 65,000 – 100Q. As an economic adviser you are required to determine: The prices to be charged in the four markets and the amount of output to be sold in each market so that total profits can be maximized. Calculate the total profit to be made from the strategy of price discrimination. Explain what would have happened if this monopolist did not implement this strategy of price discrimination. Elasticities in each market and comment.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
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Suppose a discriminating monopolist is selling a product in four separate markets in which demand functions are:
Q1 = 300 – P1; Q2 = 200 – 0.5 P2; Q3 = 150 – 0.4P3 and Q4 = 75 – 0.25P4.
Assume further that the total cost of the firm is given as TC = 65,000 – 100Q.
As an economic adviser you are required to determine:
- The prices to be charged in the four markets and the amount of output to be sold in each market so that total profits can be maximized.
- Calculate the total profit to be made from the strategy of
price discrimination . - Explain what would have happened if this monopolist did not implement this strategy of price discrimination.
- Elasticities in each market and comment.
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