You run a monopoly firm that serves two types of consumer. Individual type-A consumers have a value of 8 for their first unit of your product, a value of 4 for their second unit, and a value of zero for all additional units. Individual type-B consumers have a value of 5 for a single unit of the product and zero for any additional units. There are 3 type-A consumers and 5 type-B consumers. Your marginal cost is zero. a) If your firm can set only a single per-unit price for any units sold, what price should you choose? What is your total profit? b) If your firm can practice first-degree price discrimination, how many units are sold to each consumer and how much does each consumer pay? What is your total profit?
You run a monopoly firm that serves two types of consumer. Individual type-A consumers have a value of 8 for their first unit of your product, a value of 4 for their second unit, and a value of zero for all additional units. Individual type-B consumers have a value of 5 for a single unit of the product and zero for any additional units. There are 3 type-A consumers and 5 type-B consumers. Your marginal cost is zero. a) If your firm can set only a single per-unit price for any units sold, what price should you choose? What is your total profit? b) If your firm can practice first-degree price discrimination, how many units are sold to each consumer and how much does each consumer pay? What is your total profit?
Chapter9: Monopoly
Section: Chapter Questions
Problem 12SQP
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Transcribed Image Text:2. You run a monopoly firm that serves two types of consumer. Individual type-A
consumers have a value of 8 for their first unit of your product, a value of 4 for their
second unit, and a value of zero for all additional units. Individual type-B consumers
have a value of 5 for a single unit of the product and zero for any additional units. There
are 3 type-A consumers and 5 type-B consumers. Your marginal cost is zero.
a) If your firm can set only a single per-unit price for any units sold, what price should
you choose? What is your total profit?
b)
If your firm can practice first-degree price discrimination, how many units are sold
to each consumer and how much does each consumer pay? What is your total
profit?
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