our marginal cost per ride is providing this service; that is, you\'re a monopol

Question

our marginal cost per ride is providing this service; that is, you're a monopolist. On any given weekend, there are six customers who want a ride-three men and three women. The table below shows the most each person is willing to pay for a ride. o keep things simple, assume you are the only person Customer Maximum willingness to 70 60 50 Kristine 40 30 Samantha 20 John ar Peter Paul Let's see how you would maximize profit using different pricing schemes. 6th attempt Part 1 (1 point) See Hint If you could charge only a single price, you would earn $ in profit. Part 2 (1 point) See Hint Suppose you could charge men and women different prices. The tables below show each group's demand Maximum Customer John Peter Paul willingness to pay $70 50 30 Maximum Customer Mary Kristine Samantha willingness to pay $60 40 20 If you charge men one price and women another price, you would earn profit. S in Part 3 (1 point) 9 See Hint How much profit would you earn if you practiced perfect price discrimination? $|

Explanation / Answer

Part - 1

If we set a single price of 40, number of persons availing servise = 4 and total earnings will be maximum = 160.

So earnings = 160 - 4 * 10 = 120.................final answer

Part - 2

Men

Earnings = 100 - 2 * 10 = 80 ...............final answer

Women

Earnings = 80 - 2 * 10 = 60 ...............final answer

NOTE : A monopolist tries to maximize his earnings, hence selects that price that will maximize total earnings.

PART - 3

Under price discrimination

Monopolist will try to price different price to different customers. As long as the price is not below the marginal cost accepting that offer shall to profits of the monoplostic.

Here in the given case all the prices are more than marginal cost.

Total of all prices = 270 - 6 * 10 = 210..............final answer

Single price 70 60 50 40 30 20 Total Number 1 2 3 4 5 6 Total earnings 70 120 150 160 150 120

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