You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that 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 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. At least one group has elasticity of demand greater than 1 in absolute value. 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.

You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that 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 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. At least one group has elasticity of demand greater than 1 in absolute value. 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.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter14: Indirect Price Discrimination

Section: Chapter Questions

Problem 14.2IP

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