Homework Answers
4)
Price discrimination is pursued by the monopoly firm to earn the maximum profit. Price discrimination means charging different prices from distinct consumers.
Price is decided based on the prevailing elasticity of demand in a separate market. The market with a higher elasticity of demand is charged a lower price. while the market with a lower elasticity of demand is charged with a higher price.
it is profitable to charge the higher price in the market where the elasticity of demand is low.
Further, the resale of the product should not be possible under such circumstances. If resale of product is possible, then consumers would buy in low priced markets and resale in the market where the price is relatively higher. Further, the competition must be absent and firm must have monopoly power to fix the price of product.
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4. If a monopolist can practice third degree price discrimination, what group gets a lower price...
19 A monopolist engaging in third-degree price discrimination has lower profit than a monopolist engaging in...
19 A monopolist engaging in third-degree price discrimination has lower profit than a monopolist engaging in first-degree price discrimination creates a deadweight loss can identify with group of consumers any particular individual consumer belongs to can prevent arbitrage between different groups (or types) of consumers but not within groups of consumers. All of the above
QUESTION 5: THIRD DEGREE PRICE DISCRIMINATION (20pt) A monopolist engages in third degree price discrimination.There are...
QUESTION 5: THIRD DEGREE PRICE DISCRIMINATION (20pt) A monopolist engages in third degree price discrimination.There are 2 types of consumers, and the monopolist wants to sell to both groups. The monopolist is allowed to charge different prices and hence engages in third degree price discrimination. The demand curve for each group (the entire group) is as follows 01 500 10P Q2 200-5P2 The total cost function is TC 2000+10Q (a) What price does this firm charge to each group? (b)...
Question 2 (35 points): (3rd Degree Price Discrimination) Let there be a monopolist firm and two ...
Please answer clearly and explain.
Question 2 (35 points): (3rd Degree Price Discrimination) Let there be a monopolist firm and two groups of consumers. Suppose that marginal cost is defined by MC- 2. T'he demand that each consumer receives is given by Q,-50-pl 202 200-P 1) ( 4 points) Consider the monopolist engages in first degree price discrimina- tion only in market 2. Compute the monopoly profit in this market. ii) (4 points) Which group has a mhore inelastic demand...
Question 2 (35 points): (3rd Degree Price Discrimination) Let there be a monopolist firm and two ...
Please answer clearly and explain. Thank you!
Question 2 (35 points): (3rd Degree Price Discrimination) Let there be a monopolist firm and two groups of consumers. Suppose that marginal cost is defined by MC- 2. The demand that each consumer receives is given by 1 50- P 2Q2- 200 - P2 i) (4 points) Consider the monopolist engages in first degree price discrimina- tion only in market 2. Compute the monopoly profit in this market. ii) (4 points) Which group...
Third-Order Price Discrimination [26.4] 3. A monopolist implements ordinary price discrimination (3rd degree) with demands Q1-7-0.5P...
Third-Order Price Discrimination [26.4] 3. A monopolist implements ordinary price discrimination (3rd degree) with demands Q1-7-0.5P and Q2-5-0.5P. Costs are C = Q2 a. b. What prices will the monopolist charge? illustrate the Efficiency Loss.
Electric utilities often practice second-degree price discrimination. Why might this improve consumer welfare? Second-degree price discrimination...
Electric utilities often practice second-degree price discrimination. Why might this improve consumer welfare? Second-degree price discrimination might improve consumer welfare because, compared with single-monopoly pricing, A.profit is higher. B.output is higher. C.producer surplus is lower. D.prices are lower. E.variety is greater.
4. Assume that you are to decide whether a third degree discrimination situation is in society's ...
4. Assume that you are to decide whether a third degree discrimination situation is in society's interest. Assume that under the "no discrimination allowed" case, both groups of customers, group A and group B, can afford to buy positive amounts of the product at the same price. Under discrimination, both groups of customers can afford to purchase positive quantities of the product with group B paying a lower price than group A. Under discrimination the quantity bought by group B...
3. A monopolist is able to practice third-degree price discrimination between two markets. The demand function...
3. A monopolist is able to practice third-degree price discrimination between two markets. The demand function in the first market is q = 500 - 2p and the demand function in the second market is q = 1,500 - 6p. To maximize his profits assuming constant marginal cost, he should a. charge a higher price in the second market than in the first. b. charge a higher price in the first market than in the second. c. charge the same...
Problem 1. Second Degree price discrimination Suppose all consumers are identical and market demand given by...
Problem 1. Second Degree price discrimination Suppose all consumers are identical and market demand given by p = 100-q. The monopoly's cost function is C(q) q2. (a) Suppose the monopolist cannot discriminate prices and must set a uniform price. Compute price and quantity set by the monopolist. Compute the profit of the monopoly. b) Suppose now that the monopoly can set a two-part tariff. Find the optimal two-part tariff. Compute the profit of the monopolist Problem 2. Third Degree price...
(Figure: Third-Degree Monopolist) The monopolist in the graph has market power; he can separate the market...
(Figure: Third-Degree Monopolist) The monopolist in the graph has market power; he can separate the market into different consumer groups based on their elasticities of demand and he can prevent arbitrage. The monopolist has marginal and the second group costs of $10. If he practices third-degree price discrimination, he will charge the first group 50 47.5 45 42.5 40 3т.5 35 32.5 3D 27.5 25 22.5 20 17.5 15 12.5 1D 7.5 5 2.5 MR MR D 01 2 3...
QUESTION 5: THIRD DEGREE PRICE DISCRIMINATION (20pt) A monopolist engages in third degree price discrimination.There are 2 types of consumers, and the monopolist wants to sell to both groups. The monopolist is allowed to charge different prices and hence engages in third degree price discrimination. The demand curve for each group (the entire group) is as follows 01 500 10P Q2 200-5P2 The total cost function is TC 2000+10Q (a) What price does this firm charge to each group? (b)...
Please answer clearly and explain.
Question 2 (35 points): (3rd Degree Price Discrimination) Let there be a monopolist firm and two groups of consumers. Suppose that marginal cost is defined by MC- 2. T'he demand that each consumer receives is given by Q,-50-pl 202 200-P 1) ( 4 points) Consider the monopolist engages in first degree price discrimina- tion only in market 2. Compute the monopoly profit in this market. ii) (4 points) Which group has a mhore inelastic demand...
Please answer clearly and explain. Thank you!
Question 2 (35 points): (3rd Degree Price Discrimination) Let there be a monopolist firm and two groups of consumers. Suppose that marginal cost is defined by MC- 2. The demand that each consumer receives is given by 1 50- P 2Q2- 200 - P2 i) (4 points) Consider the monopolist engages in first degree price discrimina- tion only in market 2. Compute the monopoly profit in this market. ii) (4 points) Which group...
Third-Order Price Discrimination [26.4] 3. A monopolist implements ordinary price discrimination (3rd degree) with demands Q1-7-0.5P and Q2-5-0.5P. Costs are C = Q2 a. b. What prices will the monopolist charge? illustrate the Efficiency Loss.
4. Assume that you are to decide whether a third degree discrimination situation is in society's interest. Assume that under the "no discrimination allowed" case, both groups of customers, group A and group B, can afford to buy positive amounts of the product at the same price. Under discrimination, both groups of customers can afford to purchase positive quantities of the product with group B paying a lower price than group A. Under discrimination the quantity bought by group B...
Problem 1. Second Degree price discrimination Suppose all consumers are identical and market demand given by p = 100-q. The monopoly's cost function is C(q) q2. (a) Suppose the monopolist cannot discriminate prices and must set a uniform price. Compute price and quantity set by the monopolist. Compute the profit of the monopoly. b) Suppose now that the monopoly can set a two-part tariff. Find the optimal two-part tariff. Compute the profit of the monopolist Problem 2. Third Degree price...
(Figure: Third-Degree Monopolist) The monopolist in the graph has market power; he can separate the market into different consumer groups based on their elasticities of demand and he can prevent arbitrage. The monopolist has marginal and the second group costs of $10. If he practices third-degree price discrimination, he will charge the first group 50 47.5 45 42.5 40 3т.5 35 32.5 3D 27.5 25 22.5 20 17.5 15 12.5 1D 7.5 5 2.5 MR MR D 01 2 3...
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