Determine the profit maximizing quantities for monopolist

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Consider a monopolist who has access to two groups of consumers for its product. Group 1 has demand P1(X1)=5-X1 and group2 has demandP2(X2)=7-X2. The firm has no costs of production. (MC1 = MC2 = 0).

a) Determine the profit maximizing quantities for the monopolist in each market. Determine the associated prices.

b) Suppose that the firm can use a two-part tariff in each market. Determine the profit maximizing two-part tariffs for each market.

c) Now suppose further that the firm cannot tell whether consumers are from group 1 or 2 and so must use second-degree price discrimination. Determine the profit maximizing two-part tariffs for each market in this case.

d) Which of these possibilities is best from the economy's point of view? Why?

Reference no: EM132460785

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