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A monopolist has two types of customers. There are 100 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

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Mahe Alam
Mahe AlamLv10
28 Sep 2019

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Related questions

A monopolist sells travel services to two groups of people with the following demand curves Q1 = 100 - 2P1 (and MR1 = 50 - Q1) and Q2 = 60 -P2 (and MR2 = 60 -2Q2) . The marginal cost of providing one unit of travel service to either of the groups is the same for the monopolist, i.e., MC = $10 per unit.

(a) Identify whether group 1 or group 2 has more elastic demand.

(b) If the monopolist can price discriminate, then what prices would the monopolist charge the two groups for travel services? What quantities will the monopolist sell to each group?

(c) Suppose the monopolist is forced to charge a single price to all consumers regardless of which group they belong to. What is the profit maximizing price and quantity? Who benefits from this policy? Who loses?

(d) What would be equilibrium price and quantity if the market was competitive?

Scenario 15-1
An airline knows that there are two types of travellers: business travellers and vacationers. For a particular flight, there are 100 business travellers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.

10. Refer to Scenario 15-1. How much profit will the airline earn if it sets the price of each ticket at $600?

a. -$5,000

b. $15,000

c. $40,000 d. $60,000

 

11. Refer to Scenario 15-1. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?

a. $15,000

b. $25,000

c. $40,000 d. $70,000

 

 

12. If a monopolist can practice perfect price discrimination, the monopolist will a. eliminate consumer surplus.

a. eliminate deadweight loss.

b. maximize profits.

c. all of the above are correct.

Suppose as a manager of a profitable department store you are confronted with a pricing problem. You have two types of customers : a high-end type that are willing to pay a price of $20 for a pair of Levis Jeans, and a low-end type customer that are willing to pay a price of $13 for the same pair of jeans. Your supplier provided you with the jeans at MC of $ 11 per jeans. Your survey of your customers for jeans tells you that 50% of your customers are of the high end type and 50% are of the low end type.

(A) if you decided to price high, what would be your expected profits per unit.

(B) if you decided to price low, what would be your expected profits per unit.

(C) suppose your store attracts 1000 customers for these jeans: will you price high or low? Explain briefly.

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