problem set 6_soln

Intermediate Microeconomics: A Modern Approach, Seventh Edition

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Unformatted text preview: P 1) Part a (i). 3rd Degree Price Discrimination PL = PH , K L = K H = 0 * Inefficiency in both markets * Price between the monopoly price w/ Seperate Markets q(L) q(H) Q Deadweight Loss in Low Market pq Deadweight Loss in Low Market T 2V (q) - T 1V (q) - T q P 1) Part a (ii). 3rd Degree Price Discrimination PL PH , K L = K H = 0 * Inefficiency in both markets * Priced as independent Monopolies q(L) q(H) Q Deadweight Loss in Low Market pq Deadweight Loss in Low Market T 2V (q ) - T 1V (q ) - T q P Fixed Fee 1) Part a (iii). 3rd Degree Price Discrimination PL = PH , K L = K H * Inefficiency in both markets * Price Decreases from part (i) due to value of fixed fees q(L) q(H) Q Deadweight Loss in Low Market pq Deadweight Loss in Low Market T 2V (q ) - T 1V (q ) - T q P Fixed Fee 1) Part a (iii). 1st Degree Price Discrimination PL PH , K L K H * Efficiency in both markets * Price = Marginal Cost (zero) q(L) q(H) Q pq T 2V (q ) - T 1V (q ) - T q P Fixed Fee 1) Part b (i). 2rd Degree Price Discrimination PL = PH , K L = K H * Inefficiency in both markets * Note that this is identical to part a (iii) q(L) q(H) Q Deadweight Loss in Low Market pq Deadweight Loss in Low Market T 2V (q ) - T 1V (q ) - T q P Low Fixed 1) Part b (ii). 2rd Degree Price Discrimination PL PH , K L K H * Inefficiency in low market * Efficiency in high market * IC constraint gives High market Positive Rents Q High Fixed q(L) q(H) Deadweight Loss in Low Market pq T 2V (q ) - T 1V (q ) - T q P Low Fixed 1) Part b (iii). 2rd Degree Price Discrimination PL PH , K L K H ,QL constrained * Inefficiency in low market * Efficiency in high market * IC constraint gives High market Positive Rents * Quality constraints increases monopolists Rents High Fixed q(L) q(H) Deadweight Loss in Low Market pq T 2V (q ) - T 1V (q ) - T q Umbrellas Tatiana Initial Endowment Chris Swimming Suits ...
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This homework help was uploaded on 02/01/2008 for the course ECON 14.04 taught by Professor Izmalkov during the Fall '06 term at MIT.

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