## (Solved) Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage.

Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PAÂ = 10 - QA, and the inverse demand curve for group B is PBÂ = 18 - QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2, and the monopolist has no fixed costs. If the monopolist practices group price discrimination, the profit maximizing prices charged to each type of customer are

a.PAÂ = 6, and PBÂ = 10

b.PAÂ = 10, and PBÂ = 6

c.PAÂ = 4 and PBÂ = 8

d.PAÂ = 8, and PBÂ = 4

Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in \$ per hour and q is hours per month. The firm faces a constant marginal cost of \$1. Profit-maximizing two-part pricing yields total revenue of

a.\$16

b.\$24

c.\$40

d.\$32

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