Question
In: Economics
Suppose a pure monopolist sells output in two different markets [A&B]. (third-degree price discrimination!). The demand...
Suppose a pure monopolist sells output in two different markets [A&B]. (third-degree price discrimination!). The demand curves are given as: Market A: PA = 20 - .1QA Market B: PB = 10 - .1QB where PA, QA are price and quantity in Market A; and PB, QB are price and quantity in Market B. The firm's marginal cost of production, MC=$5.00 and constant (hence, MC=AC). Fixed costs are zero.
a) Determine the profit-maximizing quantity (Q) and price (P) for each market (i.e. QA & PA; and QB & PB ).
(b) How much (total) profit (or loss) does the firm make?
c) What are the benefits of ‘second-degree’ and ‘third-deg
Solutions
Expert Solution
C In the second degree price discrimination a monopolist is able to charge separate price for different blocks or quantity from buyers such as a high price for 1st block of say 10 units and lower prices for additional blocks. In this way the firm is able to sell a higher quantity with good prices.
On the other hand a third degree price discrimination the seller divides his buyers into two or more submarkets harvesting the maximum consumer surplus.
Rahul Sunny answered 6 months agoRelated Solutions
A monopolist is considering third degree price discrimination. It estimates that the inverse demand curves of...
A monopolist is considering third degree price discrimination.
It estimates that the inverse demand curves of its two potential
market segments are:
Segment A: P ( Q A ) = 360 − 10 Q A
Segment B: P ( Q B ) = 180 − 5 Q B
The firm operates a single plant. Assuming fixed costs are
negligible, its costs are such that:
A T C = M C = 10.
If the monopolist is able to price
discriminate,...
A monopolist is considering third degree price discrimination. It estimates that the inverse demand curves of...
A monopolist is considering third degree price discrimination.
It estimates that the inverse demand curves of its two potential
market segments are:
Segment A: P ( Q A ) = 300 − 10 Q A
Segment B: P ( Q B ) = 150 − 5 Q B
The firm operates a single plant. Assuming fixed costs are
negligible, its costs are such that:
A T C = M C = 10.
If the monopolist is able to price
discriminate,...
A monopolist practicing third degree price discrimination has two types of consumers.
A monopolist practicing third degree price discrimination has two types of consumers. Type 1 have an elasticity of demand of 2, and Type 2 have an elasticity of demand equal to 5. Which of the following is true?
A monopolist sells the same product at the same price into two different markets. The demand...
A monopolist sells the same product at the same price into two
different markets. The demand for the product in market #1 is
denoted D1(p) = 30 – 2p where p is the unit price. The demand for
the product in market #2 is given by D2(p) = 80 – 3p. Explain why
the elasticity of total demand is not defined at a unit price of
$15.
4. Define first degree price discrimination, second degree price discrimination, and third degree price discrimination. Provide...
4. Define first degree price discrimination, second degree price
discrimination, and third degree price discrimination. Provide an
example of each.
A monopolist is using third-degree price discrimination. Which of the following statements are true? I. ...
A monopolist is using third-degree price discrimination. Which
of the following statements are true?
I.
If a monopolist can use either the first-degree price
discrimination or the third-degree price discrimination, then using
third-degree price discrimination results in strictly higher profit
than using first-degree price discrimination.
II.
A monopolist using third-degree price discrimination needs to know
the willingness to pay of different groups of consumers
III.
Student discounts are an example of third-degree price
discrimination
Group of answer...
Define price discrimination. Explain the difference between first-degree and third-degree price discrimination with two examples of...
Define price
discrimination. Explain the difference between first-degree and
third-degree price discrimination with two examples of each. Your
answer will not be complete without two examples of each.
Provide your answer
here. DO NOT TRY TO COPY/PASTE YOUR ANSWER.
What is second degree price discrimination and third degree price discrimination? Explain with examples.
What is second degree price discrimination and third degree
price discrimination? Explain with examples.
Provide an example of price discrimination and classify it as first-degree, second-degree or third-degree price discrimination.
Provide an example of price discrimination and classify it as
first-degree, second-degree or third-degree price
discrimination.
Provide an example of price discrimination and classify it as first-degree, second-degree or third-degree price discrimination
Provide an example of price discrimination and classify it as
first-degree, second-degree or third-degree price
discrimination
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