For Questions 2 and 3, consider the following scenario. A monopolist has customers in two market segments, "A" and "B," which respectively have demand given by the linear inverse functions P(q) = 65-q and PB(q) = 45-q. Costs of production for the firm are C(q) = 5q + 1,000 (i.e., constant marginal costs of $5 per unit produced and Fixed Costs of $1,000). If the seller must treat these two segments as one single market, he will set a price of p = 30; customers in Segment A will buy 35 units and customers in Segment B will buy 15 units. This price results in profit of $250. 2. 3. If the monopolist is able to engage in 3rd Degree Price Discrimination, then (in comparison to the "single market" outcome described above), A. B. C. D. Consumers' Surplus in Segment A will be larger and Consumers' Surplus in Segment B will be smaller. Consumers' Surplus in Segment A will be smaller and Consumers' Surplus in Segment B will be larger. Consumers' Surplus in Segment A will be larger and Consumers' Surplus in Segment B will be larger. Consumers' Surplus in Segment A will be smaller and Consumers' Surplus in Segment B will be smaller. If the monopolist is able to engage in 3d Degree Price Discrimination, then he can earn a profit of A. $300 B. C. D. $550 $850 $1,300
For Questions 2 and 3, consider the following scenario. A monopolist has customers in two market segments, "A" and "B," which respectively have demand given by the linear inverse functions P(q) = 65-q and PB(q) = 45-q. Costs of production for the firm are C(q) = 5q + 1,000 (i.e., constant marginal costs of $5 per unit produced and Fixed Costs of $1,000). If the seller must treat these two segments as one single market, he will set a price of p = 30; customers in Segment A will buy 35 units and customers in Segment B will buy 15 units. This price results in profit of $250. 2. 3. If the monopolist is able to engage in 3rd Degree Price Discrimination, then (in comparison to the "single market" outcome described above), A. B. C. D. Consumers' Surplus in Segment A will be larger and Consumers' Surplus in Segment B will be smaller. Consumers' Surplus in Segment A will be smaller and Consumers' Surplus in Segment B will be larger. Consumers' Surplus in Segment A will be larger and Consumers' Surplus in Segment B will be larger. Consumers' Surplus in Segment A will be smaller and Consumers' Surplus in Segment B will be smaller. If the monopolist is able to engage in 3d Degree Price Discrimination, then he can earn a profit of A. $300 B. C. D. $550 $850 $1,300
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.9P
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 9 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning