Find the maximum price and output

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A monopolist sells his good in a market where there is a continuum of consumers of measure 1. Eachconsumer buys either 0 or 1 unit (imagine the good is something like a washing machine? people donot need more than one). A fraction of consumers value the good at vH, and hence they are willingto pay up to vH. The remaining 1?? fraction value it at vL < vH. The monopolist cannot distinguishthe two kinds of buyers. He can produce the good using a cost function c(q) = aq2, where a > 0 is aparameter re?ecting the quality of the production technology.Find the pro?t maximizing price andoutput. Is the monopolist?s output choice continuous in a?

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Reference no: EM131053440

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