(TC = 20(y + y2)). demand function pe(n) = 100 - yr (with MR = 100 - 22. Suppose
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(TC = 20(y + y2)). demand function pe(n) = 100 - yr (with MR = 100 - 22. Suppose that th function pi(n) = 200 - vi (with MR = 200 – 21 and the second type has the 8) (10 points) Suppose there are two types of people. Type 1 has the inverse dermat charge a different price to each group (third-degree price discrimination) ane thrm faces the same marginal cost for each type MC = 20, with total cost givet discriminate. Define y a (+ ) Then they face ith MR = 150 -- y) in this case what would be the how the two cases differ and why. a)What quantity and price is offered to each type? What is the proti the inverse demand p= 150 - y/2 (With MR = 150 - y) in this case w b) Suppose that a monopolist cannot discriminate. Define y = (1 + y2) on price and quantity sold? What would be the new profit? e}Explain in wordsExplanation / Answer
a) IN type 1.
MR=MC, => 200-2y1 = 20 so , y1 = 90
p1 = 200-90= $110
IN type 2.
MR=MC , => 100-2y2 = 20 . or y2 = 40
p2 = 100-40= $60
profits = TR in type 1 + TR in type 2 - TC
Profits = 9900 + 2400 - ( 20(130)
profits = 12300 - 2600 = $9700
b) When it cannot discriminate.
MR=MC => 150-y =20 or y= 130
p= 150-65 = $85
profits = (130*85) - (20(130)
profits = 11050 - 2600= $8450
the two case differ in price discriminating policy . in one case, monopoly use the policy of price discriminate to maximize the profits and grab all consumer surplus and in case 2 , the monopoly cannot discriminate and thus he sells the output to all customer at same price.
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