ECON 100C PS3 SP13 - ECON 100C Problem Set 3 Monopoly and...

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ECON 100C Prof. Levkoff Problem Set 3: Monopoly and Pricing Strategies Part I. Evaluate the validity of each of the following statements. Be sure to clearly accompany your explanation using graphs and equations where appropriate. a) In a relatively more elastic market, a discriminating monopolist will charge a relatively higher price. b) For a uniformly pricing monopolist, if the marginal revenue of the last unit sold is equal to the marginal cost of production, then the firm must be maximizing profits. c) Since the optimal two-part tariff involves pricing each unit at marginal cost and charging an entry fee equal to the consumer’s remaining surplus, it generates the same profit outcome for the producer as if the producer had perfectly price discriminated. d) A monopolist facing a higher fixed cost will, ceteris paribus, not produce as much output relative to if the fixed costs were lower. Part II: Analysis/Problems #1) Consider a monopolist with cost function given by Q Q C 12 ) ( serving two markets with
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