A monopolist operates in two markets whose demand functions are p₁= 100 - q₁and p₂=120 - 0.5q₂. The monopolist has a constant marginal cost of $40.
a)Find the prices and market quantities when the monopolist cannot price discriminate between the two markets.
b)Calculate the price elasticity for each market demand and evaluate it at the price and quantities derived in a. If the monopolist is allowed to use price discrimination, which one of the two markets will have a higher price? Why?
c)Find the price and market quantities when the monopolist can price discriminate between the two markets.
d)Will the consumers in the first market be better off with discrimination or not? What about the consumers in the second market?

Question

Quizplus · Accepted Answer

The Answer of A monopolist operates in two markets whose demand functions are p₁= 100 - q₁and p₂=120 - 0.5q₂. The monopolist has a constant marginal cost of $40. a)Find the prices and market quantities when the monopolist cannot price discriminate between the two markets. b)Calculate the price elasticity for each market demand and evaluate it at the price and quantities derived in a. If the monopolist is allowed to use price discrimination, which one of the two markets will have a higher price? Why? c)Find the price and market quantities when the monopolist can price discriminate between the two markets. d)Will the consumers in the first market be better off with discrimination or not? What about the consumers in the second market?

A Monopolist Operates in Two Markets Whose Demand Functions Are