HW4 Answers - ECON 1014 HOMEWORK#4 Name Pawprint ID Chapter...

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ECON 1014 HOMEWORK #4 Name: ______________________________ Pawprint ID:__________________ Chapter 14 Figure: Price Discriminating Monopolist 14 13
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Score ______ / 15 1. Use the figure on the previous page. a. In order to maximize profit, what price should the monopolist charge in Market A? In Market B? (2 pts.) P A = $16; P B = $10 (1 pt. each) b. What is total consumer surplus if the monopolist maximizes prices in both markets? (1 pt.) CS = (20-16)*12*0.5 + (12-10)*10*0.5 = 24 + 10 = $34 (1 pt.) c. What is the profit-maximizing monopolist’s profit ? (1 pt.) Profit = (16-6)*12 + (10-6)*10 = 120 + 40 = $160 (1 pt.) 2. Juan values Word at $100 and Excel at $40, and Maria values Word at $20 and Excel at $90. How much more does the seller make if it bundles than if it sells the products individually? Assume zero costs. (1 pt.) Individually: The seller chooses prices of $100 for Word and $90 for Excel to maximize profit. Bundled: The seller chooses a bundled price of $110. Since there are two customers in this market, the seller makes $220 bundling and $190 selling individually. The difference is $30. (1 pt.)
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Chapter 15 Table: Three-Country Oil Production Total Market Output Market Price
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