MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 11, Problem 4CACQ
(A)
To determine
The optimal markups and prices under third degree
(B)
To determine
The conditions under which third degree price discrimination can enhances profits is to be explained.
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You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is −3, while group 2’s is −5. Your marginal cost of producing the product is $40. a. Determine your optimal markups and prices under third-degree price discrimination. b. Identify the conditions under which third-degree price discrimination enhances profits.
You are the manager of a monopoly. Your analytics department estimates that a typical consumer's
inverse demand function for your firm's product is P= 400 -20Q, and your cost function is CQ) = 120Q
a. Determine the optimal two-part pricing strategy.
Per-unit fee: $
120
Fixed fee: $
b. How much additional profit do you earn using a two-part pricing strategy compared with charging this
consumer a per-unit price?
You are the manager of a monopoly. Your analytics
department estimates that a typical consumer's inverse
demand function for your firm's product is P = 300-20
Q, and your cost function is C(Q) = 60Q. a.
Determine the optimal two - part pricing strategy. Per -
unit fee: $ Fixed fee: $b. How much additional profit
do you earn using a two - part pricing strategy
compared with charging this consumer a per- unit
price?
Chapter 11 Solutions
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