Reference no: EM133077680
You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Analysts at your firm have determined that group 1's elasticity of demand is -6, while group 2's is -5. Your marginal cost of producing the product is $50.
a. Determine your optimal markups and prices under third-degree price discrimination.
Instructions: Enter your responses rounded to two decimal places.
Markup for group 1:
Price for group 1: $
Markup for group 2:
Price for group 2: $
b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.
Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.
Check all that apply
-At least one group has elasticity of demand greater than 1 in absolute value.
-There are two different groups with different (and identifiable) elasticities of demand.
-At least one group has elasticity of demand less than one in absolute value.
-We are able to prevent resale between the groups.