Prices under third-degree price discrimination

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Reference no: EM13831878

1. 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 -6, while group 2’s is -4. Your marginal cost of producing the product is $50.

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

Markup for group 1:

Price for group 1: $

Markup for group 2:

Price for group 2: $

b. What are necessary conditions for third-degree price discrimination to enhance profits?

2. A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 110 - 0.5P, and the marginal cost of production is $140.

a. Determine the optimal number of units to put in a package.

____ units

b. How much should the firm charge for this package?

$______

Reference no: EM13831878

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