- Suppose a monopolist has a total cost function of TC=100Q+1000, where Q is the total number of units he produces. He is able to separate his market into two distinct segments with no possibility of arbitrage, where in market one P1=500-10Q1 and in market two P2=300-20Q2. This implies that Q=(Q1+Q2).
- What price and quantity does the monopolist sell in each market if he is practising third degree price discrimination?
- What is his total profit from the two markets under the above pricing technique?
- Calculate price, quantity, and profit if he were unable to separate the two markets.
- What if he was able to identify the marginal benefit to every single customer and charged them
- their maximum willingness to pay for each quantity purchased? What if he was using two-tier
- pricing?
- Draw the demand curves for the separate markets 1 and 2 and for the joint market?
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