Suppose the demand curves in two different markets are given by: Q_1=24 - P_1 and Q_2=24 - 2P_2
and that a monopoly can serve both of these markets at a constant marginal cost of $6.
- a) If the monopoly can't separate both markets, then what would be the equilibrium price and quantity? Explain.
- b) Does the firm make a profit? If yes, how much is it? Explain.
- c) If the monopoly can separate both markets, then what type of price discrimination would the firm use? Explain.
- d) If the monopoly can separate both markets, then what would be the equilibrium price and quantity? Explain.
- e) Does the firm make a profit with price discrimination? If yes, how much is it? Explain.
- f) Should the firm practice price discrimination? Why/Why not?