The table above is consumer demand for widgets as a function of price. Suppose w

Question

The table above is consumer demand for widgets as a function of price. Suppose widgets have a fixed cost of 0, and MC = ATC = 2. Answer the following questions without calculating profits. (I will give 0 on this entire assignment to anyone who uses profit to find the answer). (0.5) What is the profit maximizing price and quantity in competitive markets? (0.5) What is the profit maximizing price and quantity in a monopoly markets? For the following 3 questions, suppose that everyone can provide an ID that shows their age, and the company can age discriminate. What price would they charge the different age groups, and what quantity would they sell to each age group? Suppose that the Q = 1,,,Q = 4 are all bought by people under the age of 30, and Q = 5,Q = 9 are bought by people over the 30. Suppose that the Q = 1 Q = 2 are all bought by people under the age of 30, and Q = 3,.Q = 9 are bought by people over the 30. Suppose that the Q = 1,,,Q=5 are all bought by people under the age of 30, and Q = 6,,Q=9 are bought by people over the 30.

Explanation / Answer

part a ) for profit max.in competitive market MC = MR = p , hence p= 2 and corresponding q = 8 . part b ) find demand curve equation , clearly it is p = 10 -q , hence MR equation is MR = 10 - 2*q ; equate MC=MR to get q =6 and corresponding p = 4 ; part c) demand equation becomes p = 10-Q1 for age 30 corresponding MR equation p = 10-2*Q1 for age 30 equate MC = MR =2 ; ie Q2 = 6 ; correponding price = 4 ,Q1 = 4 and corresponding price = 6 ; part d) similarly apply for other parts to get Q2 = 6 , p =4 and Q1 = 2 and p=9 ; part e ) same algo as above , Q2 = 6 ; p= 4 and Q1 = 5 and p = 5 ;

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