You are a monopolist producing widgets for simplicity

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You are a monopolist producing widgets (for simplicity, assume that you produce themat zero cost), and maximizing your own profits. Half of your customers value the firstwidget at $4.5 and each next widget at $0. The other half of your customers values thefirst widget at $2.5, the second at $1.5 and each next at $0.

(a) Suppose that you have to charge a uniform price. That is you post a price and one canbuy as many units as one wishes at that price. What would be your price?

(b) Suppose now that the customers of the first type are 25 years and older, and theconsumers of the second type are less than 25 years old. What is the highest possibleprofit that you can make? How would you sell the widgets?

(c) Suppose that you have no clue who is of the first type and who is of the second type.What is the highest possible profit that you can make? How would you sell the widgetsnow?

Reference no: EM13375784

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