# 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.)
Chapter 15 Table: Three-Country Oil Production Total Market Output Market Price

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