1. You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1âs elasticity of demand is -6, while group 2âs is -4. Your marginal cost of producing the product is $50.
a. Determine your optimal markups and prices under third-degree price discrimination.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2: $
b. What are necessary conditions for third-degree price discrimination to enhance profits?
2. A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumerâs demand for the product is Qd = 110 - 0.5P, and the marginal cost of production is $140.
a. Determine the optimal number of units to put in a package.
____ units
b. How much should the firm charge for this package?
$______
1. You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1âs elasticity of demand is -6, while group 2âs is -4. Your marginal cost of producing the product is $50.
a. Determine your optimal markups and prices under third-degree price discrimination.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2: $
b. What are necessary conditions for third-degree price discrimination to enhance profits?
2. A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumerâs demand for the product is Qd = 110 - 0.5P, and the marginal cost of production is $140.
a. Determine the optimal number of units to put in a package.
____ units
b. How much should the firm charge for this package?
$______
