A monopolist is seeking to price discriminate by segregating the market. The dem

Question

A monopolist is seeking to price discriminate by segregating the market. The demand in each market is given as follows:

Market A: P = 167 - 1Q
Market B: P = 158 - 1Q

The monopolist faces a marginal cost of $21 and has no fixed costs. Given this information, what price should the monopolist charge in Market B?

Round your answer to two decimal places. Do not include a $ sign.

Note: The demand equations presented above show P equal to a function of Q, rather than the usual other way around. This is so you can use the same trick used in Unit 11 to find the marginal revenue curve.

Explanation / Answer

the monopolist produces to maximize profits thus it produces where.

MRa=MRb=MC

so 167-2Qa = 21

146/2 = Qa = 73

thus Pa = 94

now MARKET B

MRb = MC

158-2Q = 21

137/2 = 68.5

Pb = 89.5

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