Total 20pts. Suppose the firm knows that, there are two types of buyers: ?? = 100...

Total 20pts. Suppose the firm knows that, there are two types of buyers: ?? = 100 − 4?, ?? = 400 − 2?. The firm’s ATC=MC=5.
1. a) Suppose the firm operates as a single price monopoly (the same price in both markets), what will be the market price, market quantity, and profit? (HINT: You need to find market demand for both type a and type B, Q=Qa+Qb, then solve! Draw diagram for yourself.) (3pts)
2. b) What will be consumer surplus, producer surplus, and deadweight loss? Draw a graph
  
  (5pts)
3. c) Under which conditions can this firm use segmented price discrimination? (2pts)
4. d) Suppose that the firm conditions from c) hold, what should the firm charge in each
  
  market? (7pts)
  1. What is output in each market?
  2. What is total market quantity?
  3. What is the firm’s profit?
5. e) Does segmented price discrimination of the market improve efficiency? Why? (3pts)

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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