Suppose a monopolist faces two market demand functions and , and has a marginal cost of Rs 10. If the monopolist is able to discriminate the demanders in the two markets, what are the prices that he would charge?
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1 mark, −0.33MicroeconomicsMonopoly and price discriminationThird-degree price discriminationModerateabout 2 min
UoH 2010 Question 4: Monopoly and price discrimination
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Suppose a monopolist faces two market demand functions D(P₁) = 80 - 5Q₁ and D(P₂) = 170 - 20Q₂, and has a marginal cost of Rs 10. If the monopolist is able to discriminate the demanders in the two markets, what are the prices that he would charge? (A) P₁ = 20, P₂ = 40 (B) P₁ = 45, P₂ = 90 (C) P₁ = 10, P₂ = 40 (D) P₁ = 90, P₂ = 45
Also written as: Suppose a monopolist faces two market demand functions D(P_1) = 80 - 5Q_1 and D(P_2) = 170 - 20Q_2, and has a marginal cost of Rs 10. If the monopolist is able to discriminate the demanders in the two markets, what are the prices that he would charge?
Monopoly and price discrimination has come up 128 times in 7 exams since 2004.
What this question tests
This question is on Third-degree price discrimination, part of Monopoly and price discrimination in Microeconomics.
Charging different groups different prices, and how elasticities decide which group pays more.
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