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 -2, while group 2's is -5. Your marginal cost of producing the product is $10.

a. Determine your optimal markups and prices under third-degree price discrimination. Instruction: Round your answers to two decimal places. Markup for group 1: Price for group 1: $ Markup for group 2: Price for group 2: $

b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.

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Kritika KrishnakumarLv10

28 Sep 2019

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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 -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. Instruction: Round your answers to two decimal places. The markup for group 1: Price for group 1: $ 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.

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.

We are able to prevent resale between the groups.

At least one group has an elasticity of demand less than one in absolute value.

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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 Q^d = 110 - 0.5P, and the marginal cost of production is $140.

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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.