13. Please 3. Suppose a monopolist recognizes that students have a different dem
ID: 1126578 • Letter: 1
Question
13. Please 3. Suppose a monopolist recognizes that students have a different demand schedule for their product than non-students. Specifically, inverse demand by students is given by: P 50 - Qs, while inverse demand by the rest of society (G) is given by P = 40-QG. The monopolist's costs are given by TC (Q) = 5Q + 50. If the monopolist were to attempt to 3rd degree price discriminate by selling to each group at a different price, what price would it charge students? What price would it charge the general public? Why wouldn't this work?Explanation / Answer
P = 50 - Qs
MRs = 50 - 2Qs
TC = 5Q + 50
MC = 5
PROFIT MAXIMISATION
MRs = MC
50 - 2Qs = 5
45 = 2Qs
Qs = 45/2
= 22.5
P = 50 - 22.5
= 27.5
so he will charge 27.5 for students
P = 40 - QG
MRG = 40 - 2QG
MRG = MC
40 - 2QG = 5
35 = 2QG
QG = 17.5
P = 40 - 17.5
= 22.5
He will charge 22.5 for general public
since monopolist is charging higher from students than general public therefore it would not work.