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A monopolist is considering third degree price discrimination. It estimates that the inverse demand curves of its two potential market segments are:
Segment A: P ( Q A ) = 120 - 10 Q A
Segment B: P ( Q B ) = 60 - 5 Q B
The firm operates a single plant. Assuming fixed costs are negligible, its costs are such that:
A T C = M C = 10
If the monopolist is able to price discriminate, what will be the equilibrium price and quantity for each market segment?
What is the deadweight loss for each market segment?
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