How much profit does the firm collect with the prices set

Assignment Help Business Economics

Reference no: EM13851021

Suppose there are two types of customers for a cell phone service: undergraduates (U) and grad Students (G). The aggregate (inverse) demand curve for undergraduates is PU = 100 − 0.25QU and the aggregate (inverse) demand curve for the graduate students is PG = 50 − QG. The firm providing the cell phone service is a monopolist with a cost function characterized by C(Q) = 4Q + 10.

(a) Suppose the firm is restricted to set a single price for both types of customers (i.e., no price discrimination). What price does the firm set? How much profit does the firm collect?

(b) How much consumer surplus is generated at the price identified in (a)?

(c) Suppose the firm sets a price of $48 for a quantity smaller or equal than 200 minutes and a price of $46 for a quantity beyond the 200th minute. In this situation, what quantity should undergraduates choose? And what quantity should graduate students choose?

(d) What consumer surplus will each customer type enjoy at the prices set in (c)?

(e) How much profit does the firm collect with the prices set in (c)?

(f) Why would a firm choose a second-degree price discrimination strategy rather than a first- degree price discrimination strategy? (You only need to provide one reason)

Reference no: EM13851021

Questions Cloud

Forest point construction : At Forest Point Construction, your boss says that he can estimate the total project time based on his personal experience. You are trying to convince him that he should use project management techniques to handle a complex project. What is the correc..

Deferred annuity where monthly withdrawals begin : What lump sum of money (P) must be deposited into a bank account at the present time so that $500/month (A) can be withdrawn for five years (N), with the first withdrawal scheduled 6 years from today at a nominal interest rate (r) of 9% per year? [Hi..

Find limit output for fixed costs-stackelberg equilibrium : Suppose that inverse demand is given by D(Q) = 56 − 2Q, Q = q1 + q2 and the cost function is TC(qi ) = 20qi + f Find the Stackelberg equilibrium and compare it to the Cournot equilibrium. 6. What is the SPNE for the entry game with the following timi..

Quantitative analysis and decision-making : Quantitative Analysis and Decision-Making

How much profit does the firm collect with the prices set : Suppose there are two types of customers for a cell phone service: undergraduates (U) and grad Students (G). The aggregate (inverse) demand curve for undergraduates is PU = 100 − 0.25QU and the aggregate (inverse) demand curve for the graduate studen..

How much consumer surplus is generated at the prices : A monopolist firm serves 6 consumers. Each of the consumers only buy one unit of the good. Two consumers buy one unit if the price is lower or equal than $100 and the other four consumers buy one unit if the price is lower or equal than $10. The firm..

Firm is restricted to set single price for both markets : Firm C&D is a monopolist both in the US market and in the international market. The demand curve for the US market is QUS = 10 − PUS and the demand curve for the international market is QI =20−PI. The firm’s cost function is C(Q)=2Q+2. Suppose the fi..

What is the profit-maximizing price and quantity : Suppose the firm A&B is a monopolist. What is the profit-maximizing price and quantity? How much profit does the firm collect? How much consumer surplus does the firm generate? What is the deadweight loss? Suppose consumers cannot see the differences..

What is the net present value of investment : ESPN currently pays the NFL $1.1 billion per year for eight years for the right to exclusively televise Monday Night Football. What is the net present value of this investment if the parent Disnery company has an opportunity interest rate equal to it..

User Account

All Pages