4. Consider a monopolist with cost funetion c(q) = 20g, who is facing two con- sumers. The consumers' demand functions are given by 91= 100 -p 92 = 300 – 3p. (a) Suppose the monopolist does not price discriminate. Find the monopolist's optimal pricing strategy, the resulting profit, and Lerner Index. (b) Suppose the monopolist can engage in third degree price discrimination. Find the monopolist's optimal pricing strategy and the resulting profit. Compare the profit with that found in part (a), and give an intuitive ex- planation. (c) Now, suppose the monopolist can produce the good at zero cost. That is clq) = 0. Find the monopolist's optimal second degree price discrimination strategy.

4. Consider a monopolist with cost funetion c(q) = 20g, who is facing two con- sumers. The consumers' demand functions are given by 91= 100 -p 92 = 300 – 3p. (a) Suppose the monopolist does not price discriminate. Find the monopolist's optimal pricing strategy, the resulting profit, and Lerner Index. (b) Suppose the monopolist can engage in third degree price discrimination. Find the monopolist's optimal pricing strategy and the resulting profit. Compare the profit with that found in part (a), and give an intuitive ex- planation. (c) Now, suppose the monopolist can produce the good at zero cost. That is clq) = 0. Find the monopolist's optimal second degree price discrimination strategy.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.5P

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