blem: Suppose that a monopolist, who sells all units at a uniform price, faces an inverse market demand curve P=100- 2Q. If the firm’s total cost were instead positive, given by the function TC=10Q, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variabl

blem: Suppose that a monopolist, who sells all units at a uniform price, faces an inverse market demand curve P=100- 2Q. If the firm’s total cost were instead positive, given by the function TC=10Q, what output would the firm produce to maximize profit, what price would the firm charge, and what profit would the firm earn? Give the numerical value of these three variabl

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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A monopolist with a marginal cost MC = 2 faces two types of customer groups. Type 1 has itinverse demand function P1 = 10 - 0.5x, while type 2 has the inverse demand functionP2 = 10-x. What prices will the monopolist charge if he can discriminate on price between the two groups?Calculate, illustrate with the help of figures and explain the intuition behind the result. I have done the calculations/illustrations and they are correct, but I do not understand the intuition behind the result. Is it taht the monopoly doesn't have to discriminate to reach optimal quantities for each customer base?
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