Suppose that a monopolist faces two markets with demand curves given by: D1 (p1 ) = 100 – p1 D2 (p2) = 100 – 2p2 And also assume that the monopolist’s marginal cost is constant at $20 a unit. 1. If the monopolist can price discriminate, what price should the firm charge in each market in order to maximize profits? 2. Suppose the firm cannot price discriminate, what price should it charge?

Suppose that a monopolist faces two markets with demand curves given by: D1 (p1 ) = 100 – p1 D2 (p2) = 100 – 2p2 And also assume that the monopolist’s marginal cost is constant at $20 a unit. 1. If the monopolist can price discriminate, what price should the firm charge in each market in order to maximize profits? 2. Suppose the firm cannot price discriminate, what price should it charge?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter12: Monopoly

Section: Chapter Questions

Problem 3DQ

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Question

Suppose that a monopolist faces two markets with demand curves given by:

D₁ (p₁ ) = 100 – p₁

D₂(p₂) = 100 – 2p₂

_{And also assume that the monopolist’s marginal cost is constant at $20 a unit.
1. If the monopolist can price discriminate, what price should the firm charge in each
market in order to maximize profits?}

_{2. Suppose the firm cannot price discriminate, what price should it charge?}

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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