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Author Question: A monopolist sells to two consumer groups, students and non-students. Demand for students: Q = ... (Read 191 times)

dejastew

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on: Jul 1, 2018
A monopolist sells to two consumer groups, students and non-students.
 
  Demand for students: Q = 500 - 1/2P
   Demand for non-students: Q = 750 - 2P
   MC = 20
 
  Find the profit-maximizing price/quantity combination in each market if the groups can be separated.

Question 2

Because firms selling a homogeneous product set price in response to the (perceived) pricing decision of other firms in the Bertrand Model of oligopoly in equilibrium price exceeds marginal cost.
 
  Indicate whether the statement is true or false


jaykayy05

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Reply #1 on: Jul 1, 2018
Answer to Question 1

Students:
P = 1000 - 2Q
MR = 1000 - 4Q
Set MR = MC. 20 = 1000 - 4Q
245 = Q, P = 510

Non-students:
P = 375 - 1/2 Q
MR = 375 - Q
Set MR = MC. 20 = 375 - Q
355 = Q, P = 197.50

Answer to Question 2

False. Because firms set price and sell a homogeneous product other firms will always set price lower if a firm prices above marginal cost. In equilibrium all firms charge P=MC (same as the competitive equilibrium)


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