You are the manager of a monopoly that sells a product to two groups of consumers...

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 -5. Your marginal cost of producing the product is $50. a. Determine your optimal markups and prices under third-degree price discrimination. Instructions: Enter your responses rounded 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. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.

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 elasticity of demand less than one in absolute value.

At least one group has elasticity of demand greater than 1 in absolute value.

Expert Solution

Rahul Sunny answered 2 years ago

You are the manager of a monopoly that sells a product to two groups of consumers...

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 -5, while group 2’s is -2. Your marginal cost of producing the product is $30. a. Determine your optimal markups and prices under third-degree price discrimination. Instructions: Enter your responses rounded to two decimal places. Markup for group 1: _______________ Price for group 1: $ ________________ Markup for group 2: ________________________ Price...

A monopoly has a marginal cost of zero and faces two groups of consumers. At first,...

A monopoly has a marginal cost of zero and faces two groups of consumers. At first, the monopoly could not prevent resale, so it maximized its profit by charging everyone the same price,p = $5. No one from the first group chose to purchase. Now the monopoly can prevent resale, so it decides to price discriminate. Will total output expand? Why or why not? What happens to profit and consumer surplus?

Suppose that a monopoly sells its product in a market with 10 identical consumers. Each consumer...

Suppose that a monopoly sells its product in a market with 10 identical consumers. Each consumer has an individual demand given by P = 30 − 2y, where y is the individual quantity demanded at price P. The firm has no fixed costs and a constant marginal cost equal to 5. a) Show that the aggregate inverse market demand is given by P(Y ) = 30 − Y /5, where Y is total quantity demanded in the market. b) First,...

Suppose a monopoly with constant marginal cost of 10 sells its product to identical consumers. Each...

Suppose a monopoly with constant marginal cost of 10 sells its product to identical consumers. Each consumer has an inverse demand curve given by P = 210 − 10Q. (a) Find the price and quantity the monopolist chooses if it can only set one price, and it can not use a two-part tariff. What is the monopolist’s profit on each consumer? (b) Now suppose the monopolist can use a two-part tariff. What is the profit maximizing choice of the fixed...

A monopoly firm sells its product to two countries: A and B. Demand in the two...

A monopoly firm sells its product to two countries: A and B. Demand in the two countries are QA = 100 – 2p and QB = 80 – p. Firm’s cost function is C = 100 + 10Q. Find the firm’s total profit and the prices it charges in the two countries.

When the monopoly firm sells two units of its product, it earns total revenue of $260...

When the monopoly firm sells two units of its product, it earns total revenue of $260 and it incurs a total cost of $210. If its marginal revenue for the second unit was $110, what was the marginal revenue of the first unit? Group Choice Answers: $100 $150 $133 $220 There is not enough information to answer the question.

A firm sells its product to two groups of customers. Demand from group 1 is Q1...

A firm sells its product to two groups of customers. Demand from group 1 is Q1 = 100, 000− 5,000P and demand from group 2 is Q2 = 140,000 − 10,000P. a) Find the total demand that the firm faces for its product. Explain it first using pictures, and then do the algebra. Write your answer of the total demand as quantity as a function of price. (Hint: draw pictures. Then add the two demands horizontally; that is, at each...

Suppose you are the manager of a theatre company. You have identified two groups of customers....

Suppose you are the manager of a theatre company. You have identified two groups of customers. Group 1 has a demand given by Q 1 = 100 - P and Group 2 has a demand given by Q 2 = 120 -3P. You are currently charging the same price - 40 euros - to both groups. To maximize revenue, you should charge a price of (a) 12.50 euros to group 1 and 20 euros to group 2 (b) 50 euros...

You are the appointed Supply Chain Manager for a company that manufactures and sells its products to retailers and to end consumers.

MGMT5018 Individual Assignment 1 Week 3 MGMT 5018 Individual Assignment # 1, Due in Week 4 - 15% of Overall Mark You are the appointed Supply Chain Manager for a company that manufactures and sells its products to retailers and to end consumers. The company uses its own trucks to deliver to retailers and UPS for its online orders to deliver to end consumers. Apply your understanding of the 5 components of Supply Chain by explaining to me as your...

Consider the following two groups of consumers in the market for movie tickets – Students and...

Consider the following two groups of consumers in the market for movie tickets – Students and Working Adults. Suppose the Marginal Cost of selling to either group is the same and equal to $4. At the monopoly price for each group, demand elasticities are as follows: |ES|= 3 and |EW|= 2 What is the Lerner Index of Market Power in the student market? What is the Lerner Index of Market Power in the Working Adult market? What is the monopoly...

Question

You are the manager of a monopoly that sells a product to two groups of consumers...

Solutions

Expert Solution

Related Solutions

You are the manager of a monopoly that sells a product to two groups of consumers...

A monopoly has a marginal cost of zero and faces two groups of consumers. At first,...

Suppose that a monopoly sells its product in a market with 10 identical consumers. Each consumer...

Suppose a monopoly with constant marginal cost of 10 sells its product to identical consumers. Each...

A monopoly firm sells its product to two countries: A and B. Demand in the two...

When the monopoly firm sells two units of its product, it earns total revenue of $260...

A firm sells its product to two groups of customers. Demand from group 1 is Q1...

Suppose you are the manager of a theatre company. You have identified two groups of customers....

You are the appointed Supply Chain Manager for a company that manufactures and sells its products to retailers and to end consumers.

Consider the following two groups of consumers in the market for movie tickets – Students and...