Suppose that spending 80 on advertising will attract 100

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A monopolist has two types of customers. There are 100 of type A, who will each pay up to $10 for a single unit of the good, and 50 of type B, who will each pay up to $8. Neither is willing to purchase additional units at any price. If it must charge a uniform price , find that price.

Assume that spending $80 on advertising will attract 100 more Type B customers. Should the monopolist advertise? If so, what will happen to price? Explain the role of advertising, if any, in this case.

Reference no: EM13390977

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