Problem 11-04 (Algo): 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 -6, while group 2's is -3. Your marginal cost of producing the product is $70.
a. Determine your optimal markups and prices under third-degree price discrimination. Instructions: Round your answers to two decimal places.
The markup for group 1:
Price for group 1:
The markup for group 2:
Price for group 2:
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits. Instructions: You may select more than one answer.
- At least one group has an elasticity of demand less than one in absolute value.
- We are able to prevent resale between the groups.
- There are two different groups with different (and identifiable) elasticities of demand.
- At least one group has an elasticity of demand greater than 1 in absolute value.
Problem 11-04 (Algo): 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 -6, while group 2's is -3. Your marginal cost of producing the product is $70.
a. Determine your optimal markups and prices under third-degree price discrimination. Instructions: Round your answers to two decimal places.
The markup for group 1:
Price for group 1:
The markup for group 2:
Price for group 2:
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits. Instructions: You may select more than one answer.
- At least one group has an elasticity of demand less than one in absolute value.
- We are able to prevent resale between the groups.
- There are two different groups with different (and identifiable) elasticities of demand.
- At least one group has an elasticity of demand greater than 1 in absolute value.
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Related questions
18).
You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1s elasticity of demand is -2, while group 2s is -4. Your marginal cost of producing the product is $40.
a. Determine your optimal markups and prices under third-degree price discrimination.
Instruction: Round your answers to two decimal places.
The markup for group 1:
Price for group 1: $
The markup for group 2:
Price for group 2: $
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
Instructions: You may select more than one answer. Click the box with a checkmark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.
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At least one group has the elasticity of demand less than one in absolute value. |
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There are two different groups with different (and identifiable) elasticities of demand. |
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We are able to prevent resale between the groups. |
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At least one group has the elasticity of demand greater than 1 in absolute value. |
