Price Discrimination Student Instructions

April 2024 · 1 minute read
Price Discrimination Student Instructions

Suppose the monopolist has a cost of $2 per unit. The monopolist sets quantity to be 7 units in the Blue Market and 2 units in the Orange Market. The demand curve for the Blue Market is P=20 - 2Q. The demand curve for the Orange Market is P=5 - Q. Because the monopolist is able to separate markets that means there are two market prices:

P= 20 - 2(7) = $6 in the Blue Market

P= 5 - (2) = $3 in the Orange Market

So the monopolist profit is:

Profit = 7x($6 - $2) + 2x($3 - $2) = $30

tiled icons

ncG1vNJzZmirY2LCtHnWnqqtZWJjrq6t2ailmq%2BjY7CwuY6mppukkZd6rq3Nrpilq1%2Beu7TA0a6araGfo8BwvNGimp6XlJ7ApL7IpqCnmaSevK%2Brz6ugnJ1encGuuA%3D%3D