"Vitamin Strong" has the monopoly on the production of vitamin C. It faces geographically separated markets, denoted A and B. The demand on these two markets are respectively QA = 1-PA and QB = 0.5-PB. The transport and production costs are zero for simplicity. Suppose that the firm chooses to set a local prices for each of the two markets. In this case the optimal prices are PA and QB= (All numeric 11111' = _____ and PB- and would supply A-- PB... ----- answers rounded to two decimals) Blank # 1 N Blank # 2 Blank # 3 Blank # 4 N

"Vitamin Strong" has the monopoly on the production of vitamin C. It faces geographically separated markets, denoted A and B. The demand on these two markets are respectively QA = 1-PA and QB = 0.5-PB. The transport and production costs are zero for simplicity. Suppose that the firm chooses to set a local prices for each of the two markets. In this case the optimal prices are PA and QB= (All numeric 11111' = _____ and PB- and would supply A-- PB... ----- answers rounded to two decimals) Blank # 1 N Blank # 2 Blank # 3 Blank # 4 N

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.1P

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A manager of a nightclub realizes that demand for drinks is more elastic among students and is trying to determine the optimal pricing schedule. Specifically, he estimates the following average demand for his customer types: Under 25: qr=18-5p Over 25: q=10-2p The two age groups visit the nightclub in equal numbers on average. Assume that drinks cost the club $2 to make. If the manager cannot identify to which group his customers belong, what is the uniform monopoly price? If the manager can identify to which group his customers belong, what price will he charge each group. Assume the manager can only charge a single price to each group. If the manager can charge a separate entry fee and a price per drink for each group, what two-part price will the manager set for reach group. Now suppose that once again it is impossible to identify which group the customers belong. Suppose the manager lowers the price of drinks to equal to marginal cost and still wanted to attract both…
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