A seller produces output with a constant marginal cost MC = 24. Suppose there is one...

A seller produces output with a constant marginal cost MC = 24. Suppose there is one group of consumers with the demand curve P1 = 80 − 2Q1, and another with the demand curve P2 = 60 − 3Q2.

(a) If the seller can discriminate between the two markets, what prices would she charge to each group of consumers?

(b) If the seller cannot discriminate, but instead must charge a uniform price to consumers in both markets, what will be her profit-maximizing price?

(c) Which, if any, consumer group benefits from price discrimination?

(d) If instead P1 = 60 − 2Q1, does either group benefit from price discrimination?

Expert Solution

Rahul Sunny answered 2 years ago

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