Answered: Suppose you have two types of…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter14: Indirect Price Discrimination

Section: Chapter Questions

Problem 4MC

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1. Suppose you have two types of beverages: a cola and a beer. Are these products in the same market?

2. The table in Question 3 shows data for a monopolist who sells a good to four households, each of which buys at most one unit and each of which has a different valuation for the good. The monopolist can produce the good at a marginal cost of $4. The monopolist can discriminate perfectly in its pricing, charging each household its valuation. Fill in the missing elements in the table. How many units should the monopolist produce? How does your answer change if marginal cost is $6?

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