Consider a monopolist facing two groups of consumers with demand curves given by q1= 5−p and...

Consider a monopolist facing two groups of consumers with demand curves given by q1= 5−p and q2= 5−2p. The monopolist does not have any cost of production.

(a) Find the profit-maximizing prices and quantities under third-degree price discrimination (group-specific pricing)

(b) If the monopolist cannot price discriminate (must charge everyone the same price), what is the demand curve facing the firm? (Hint: remember to sum demand curves horizontally)

(d) Compare profits and consumer surplus under third-degree price discrimination to profits and consumer surplus under a single price.

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Expert Solution

Rahul Sunny answered 1 year ago

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