Reference no: EM13733352
You are a monopolist producing video game software and know you can segment your market into two distinct groups of consumers: kids who will pay almost any price for your software, and older consumers who are very price-sensitive. Your investigation of the market has shown that the demand by kids is Qk = 100 - pk while the demand by adults is Qa = 800 - 40pa . Your marginal cost of producing videos is MC = 5.
(a) If you were to engage in multimarket (sometimes called "third-degree") price discrimination, what prices would you charge to each market segment?
(b) How many units would you sell to each market?
(c) What would your total producer's surplus be?
Assuming all the same relationships as in the problem above, are you better off by price discriminating or by charging a single price to the entire market? To answer this question,
(a) Determine the aggregate demand for videos. [Hint: Be careful to account for the kink.]
(b) Using this aggregate demand, determine the single monopoly price you would charge.
(c) Calculate the producer's surplus you would receive from this market strategy.
(d) Compare with 1(c), to conclude whether a single price or price discrimination is better.
|
Definitely cause price to decrease
: Which of the following would definitely cause price to decrease (if they occurred simultaneously)?
|
|
What is the minimum efficient scale for a firm run
: Consider an industry in which two types of managers run firms, Genius and Ordinary. There is a fixed supply of 100 genius managers, whereas there is unlimited supply of ordinary managers. Both types of managers are willing to work for a salary of $14..
|
|
The pros and cons of the regional economic integration
: Regional economic integration can be seen as an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under international agreements, such as the WTO. What are the pros and cons of th..
|
|
Arguments for regional economic integration
: What are the economic and political arguments for regional economic integration? Given these arguments, why don't we see more integration in the world economy?
|
|
Determine the aggregate demand for videos
: You are a monopolist producing video game software and know you can segment your market into two distinct groups of consumers: kids who will pay almost any price for your software, and older consumers who are very price-sensitive. Assuming all the sa..
|
|
Changes in fiscal and monetary policy
: Studies indicate that the changes in fiscal and monetary policy affect the 3 economic agents in the economy (households, firms and government). How do the changes in monetary and fiscal policy instruments affect you personally or work wise?
|
|
Pros and cons if policymakers use monetary and fiscal policy
: There are pros and cons if policymakers use monetary and fiscal policy to stabilize the economy. Explain the main arguments in favor of economic stabilization. Explain why policy lags could make stabilization policies counterproductive.
|
|
Identify your fixed and variable costs at your fast-food
: You are the owner of a fast-food restaurant. Given a new item that you recently advertised, you experience additional demand for your business that you do not want to ignore. Identify your fixed and variable costs at your fast-food restaurant, and ex..
|
|
Netflix has been disruptive to more than one market
: Netflix has been disruptive to more than one market. Select the market in which you think it has been least disruptive.
|