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Optimal markups and prices under third-degree price

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Reference no: EM132616967

You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1's elasticity of demand is -5, while group 2's is -4. Your marginal cost of producing the product is $30.

a. Determine your optimal markups and prices under third-degree price discrimination.

Instructions: Enter your responses rounded to two decimal places.

Markup for group 1:

Price for group 1: $

Markup for group 2:

Price for group 2: $

b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.

Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.

-There are two different groups with different (and identifiable) elasticities of demand.

-At least one group has elasticity of demand less than one in absolute value.

-At least one group has elasticity of demand greater than 1 in absolute value.

-We are able to prevent resale between the groups.

Reference no: EM132616967

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