Suppose that a price-discriminating monopolist has segregated its market into tw

Question

Suppose that a price-discriminating monopolist has segregated its market into two groups of buyers as shown in the table below a. Calculate the missing total-revenue and marginal-revenue amounts for Group1 Instructions: Enter your answers as whole numbers in the gray-shaded cells. If you are entering any negative numbers be sure to include a negative sign (+) in front of those numbers Group 1 Group 2 Total Maroio Total Quantity Quantity Demanded Revenue Price Price Demanded RevenueRee $115 100 Revenue 0.00 $ 100.00 100.00 66.00 47.00 39.00 23.00 3.00 6.00 2.00 1.00 7.00 $ 166.00$ S 213.00 71 47 $71 s 0 $63 47 34 24 17 13 $ 252.00 63 $ 288.00 $ 294.00 $ 296.00 $ 297.00 $ 290.00$ 110 144 168 185 198 42 37 37 29 10 29 b. Assume that MC is $13 in both markets and MC ATC at all output levels. What price will the firm charge in each market? Group 1: units at a price of Group 2 units at a price of c. Based solely on these two prices, which market has the higher price elasticity of demand? (Click to select d. What will be this monopolist's total economic profit?

Explanation / Answer

To maximize profits a monopolist produces at MR = MC ;

Therefore ,

Group 1 : 6 units at the price of 48$

Group 2 : 6 units at the price of 33$

In both markets 6 units are sold but at different price . Group 2 has higher elasticity , so the monopolist cannot charge a higher price .

Total economic profit = Total revenue - Total cost = ( 6 * 48 ) + ( 6*33 ) - ( 13 * 12) = 330$

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