Question

D Question 5 1 pts Laura runs a nightclub called the 'Two Standard Drinks. Given the popularity and cache of the club, she has a monopoly position in the market. The market demand curve is given by P = 120 - 9. Laura has a marginal cost per drink of MC = 2q and a fixed cost FC = $150. If Laura charges the same price to all customers. what are Laura's profit-maximising price PM and quantity qM? PM-590: - 60 units PM - 560: - 60 units PM - 5120: M - O units PM - 530: GM- 30 units PM - 590: M = 30 units Question 6 1 pts With perfect price discrimination, the: marginal revenue curve is below the demand curve. marginal revenue is horizontal marginal revenue is above the demand curve. marginal revenue is equal to the demand curve. none of the above Question 7 1 pts Andrew runs a nightclub called "Fun 1040". Given the popularity and cache of the club, he has a monopoly position in the market. Males nightclub goers have an individual demand curve of P = 22-, whereas female customers each have an individual demand curve of P = 16-9. Andrew has a marginal cost per drink of MC = $2 per unit and no fixed cost. By law. Andrew is unable to charge an entrance fee. He can, however, charge different prices for men and women for their drinks (by serving men blue glasses and women customers their drinks in green glasses). If Andrew tries to maximise profit, which statement is true? Andrew charges both men and women S12 per drink this is first-degree price discrimination Andrew charges men 59 per drink and women $12 per drink this is an example of third-degree price discrimination. Andrew charges men 512 per drink and women S9 per drink this is an example of third-degree price discrimination. Andrew charges men $10 per drink and women $7 per drink this is an example of third-degree price discrimination. Andrew will use second price discrimination in order to maximise the profit.

Answer 1

1)Revenue=TR=$P\times q=(120-q)\times q=120q-q^2$

MR=$\frac{\partial TR}{\partial q}=\frac{\partial (120q-q^{2})}{\partial q}$$\frac{\partial TR}{\partial q}=\frac{\partial (120q-q^{2})}{\partial q}=120-2q$

Profit maximizing output of firm is where the MC=MR

Given MC=2q

$120-2q=2q$

$\Rightarrow 120=4q$

$\Rightarrow q=30$

Maximizing Price=120-q=120-30=$90

Therefore,option (e) is correct

2)Under first degree price discrimination,a firms MR curve equals the firms demand curve. The demand curve captures the maximum price a customer is willing to pay for each unit of the commodity.The MR curve plots the additional revenue earned on each unit of good sold. Because under first degree price discrimination,a monopolist tries to sell the commodity at the maximum price that the consumer is willing to pay,the demand curve equals the MR curve. Option d is correct.

3)The question is an example of third degree price discrimination because the same producer is charging two different prices for the same commodity from two different types of people.

For Males,

$P_{m}=22-q$

$TR_{m}=P_{m}\times q=(22-q)q=22-q^{2}}$

$\Rightarrow MR_{m}=\frac{\partial TR}{\partial q}=\frac{\partial(22q-q^{2})}{\partial q}$

$=22-2q$

For Females,

$P_{f}=16-q$

$TR_{f}=P_{f}\times q=(16-q)q=16-q^{2}}$

$\Rightarrow MR_{ f}=\frac{\partial TR}{\partial q}=\frac{\partial(16q-q^{2})}{\partial q}$

$=16-2q$

MC for both is $2

Profit for each gender is maximized when MC=MR for each gender

For females,

22-2q=2

or 20=2q or q=10.This coorespnds to a price of P=22-q or P=$12

For males,

16-2q=2

or 14=2q

or q=7.This corresponds to a price of P=16-q or P=16-7=$9

Therefore,Andrew charges men,$9 per glass and the females, $12 per glass.Option b is correct.