ECON 204 hw9 - ECON 204 STUDY QUESTIONS 9 Price...

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ECON 204 STUDY QUESTIONS 9 Price Discrimination, Externalities 1) A monopolist is deciding how to allocate output between two markets. The two markets are separated geographically (East Coast and Midwest). The monopolist’s total cost is TC = 5 + 3(Qa + Qb), and thus, MC = 3. The monopolist’s demand for the two markets are as follows: Pa = 15 – Qa; Pb = 25 – 2Qb. Calculate the monopolist’s price, output, profit and the deadweight loss to society if s/he can price discriminate. 2) Suppose that Philadelphia Electric has decided to use second-degree price discrimination (block pricing) in setting rates for household electrical use. Suppose further that the typical household in Philadelphia has a demand for electricity given by the following demand curve KWH = Q = 1600 – 100P where KWH denotes the number of Kilowatt hours demanded and P is the price per Kilowatt (measured in cents). The company offers 3 kinds of consumption packages as 400 Kilowatts 800 Kilowatts and 1200 Kilowatts in a way that as a consumers
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ECON 204 hw9 - ECON 204 STUDY QUESTIONS 9 Price...

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