Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -3 and group 2 has a price elasticity of demand of -9. If you could conduct third-degree price discrimination, which group would you charge a higher price to? Why? What would be the relative price of group 1 to group 2? Suppose that the profit-maximizing price for group 2 is $12. What price should I charge group 1? Show all your work.

Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -3 and group 2 has a price elasticity of demand of -9. If you could conduct third-degree price discrimination, which group would you charge a higher price to? Why? What would be the relative price of group 1 to group 2? Suppose that the profit-maximizing price for group 2 is $12. What price should I charge group 1? Show all your work.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 3SCQ: Suppose the local electrical utility, a legal monopoly based on economies of scale, was split into...

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Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -4 and group 2 has a price elasticity of demand of -6. If you could conduct third degree price discrimination, which group would you charge a higher price to? Why? Suppose the the profit maximizing price for group 2 is $36. What price should I charge group 1? Show all your work.
Suppose the own price elasticity of market demand for retail gasoline is -0.9, the Rothschild index is 0.6, and atypical gasoline retailer enjoys sales of $1, 200, 000annually. What is the price elasticity of demand for arepresentative gasoline retailer's product? Instruction:Enter your response rounded to two decimal places. Ifentering a negative number, be sure to use thenegative (-) sign.
Suppose both a monopolist and a perfectly competitive firm are producing in theirrespective markets at a point where marginal cost is $8 and marginal revenue is $10. Whatshould the profit-maximizing firms do? Group of answer choices Both the monopolist and the perfectly competitive firm should increase output until MC= MR. The monopolist should keep producing at this level but the perfectly competitive firmshould decrease output until MC = MR. The monopolist should increase output but the perfectly competitive firm should shutdown. Both the monopolist and the perfectly competitive firm should decrease output until MC= MR.
In a market where a monopolist can charge different prices to different groups, which of the following groups will likely be charged the lowest price?O a. the group for which the good is a necessityO b. the group for which the good makes up a large portion of income (big-ticket item)O c. the group for which the good has no good substitutesO d. the group for which the good makes up a small portion of income (small-ticket item)O e. The groups described in (a), (c), and (d) will all get charged a lower price than the group described in (b).
You are the manager of a monopolistically competitive firm. The demand curve of the firm is linear, and the marginal cost is a fixed constant. a. Graphically illustrate the profit-maximizing output and price set by the monopolistic firm. b. If the government set a tax of $t per unit sold, graphically illustrate how the output and price of the monopolist’s profit maximization will change? *Please show all work*
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Assume that there are two consumer of a good X. Mr. A has a utility function u (x)10xx2,whileMrs.Bhasautilityfunction u (x)10x2x2 . AB Farmer F, the monopoly producer of good X, cannot distinguish between Mr. A and Mrs. B. However, he can sell different sized bundles, and charge different prices for them. a. What are the utility-maximizing levels of good X consumption xA and xB for Mr. A and Mrs. B, respectively? b. Suppose that Farmer F offers the bundles of size xA and xB . What are the prices ( pA , pB ) that he should charge so that Mr. A consumes the xA -sized bundle at price pA and Mrs. B consumes the xB -sized bundle at price pB ?