A monopolist would like to practice third-degree price discrimination. Its first group of customers is represented by the demand equation, Q_D₁ = 10 - P₁. The second group is represented by the demand equation, Q_D₂ = 10 - 2P_2. Assume marginal costs of $4 in both markets. Compare the profit the monopolist would make as a single-price monopolist to what it would earn with third-degree price discrimination. Based on your calculations, does it make sense for this monopolist to price discriminate?

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The Answer of A monopolist would like to practice third-degree price discrimination. Its first group of customers is represented by the demand equation, Q_D₁ = 10 - P₁. The second group is represented by the demand equation, Q_D₂ = 10 - 2P_2. Assume marginal costs of $4 in both markets. Compare the profit the monopolist would make as a single-price monopolist to what it would earn with third-degree price discrimination. Based on your calculations, does it make sense for this monopolist to price discriminate?

A Monopolist Would Like to Practice Third-Degree Price Discrimination