Long Answer Questions for COMM/FRE 295 (104) Final Exam (2008) Review
Session
1. Consider a monopolist selling to two groups of consumers.
(a) Provide two conditions that are necessary for the monopolist to
engage in price discrimination.
(b) When all consumers are identical, which yields higher profit: perfect
price discrimination or twopart pricing? Explain.
2. A monopolist faces demand from two groups, and can price discriminate. The total
demand from the first group is Q
A
= 10 – P and the total demand from the second
group is Q
B
= 12 – 2P. The monopolist’s total cost is C(Q) = 5 + 2Q
. Provide the
optimal prices that the monopolist will charge and the quantities that the
monopolist will sell.
3. Suppose that a monopolist wants to sell to two groups of consumers. All 10 individuals
in group A are identical, and the total demand function for this group is Q
A
= 100
– 20P. All 10 individuals in group B are identical and the total demand function
for this group is QB = 150 – 20P. Suppose that the monopolist implements a two
part pricing system, selling to all consumers, with a price per unit equal to 2
dollars and a common fixed fee. Calculate the total revenue of the monopolist.
4. Consider a monopolist producer of flowers, facing demand Q
D
= 20 – 2P, and constant
marginal cost equal to 2 dollars per unit. The purchase of flowers yields a positive benefit
to neighbours of the purchaser in the amount of 1 dollar for each unit purchased.
(a) How many flowers does the monopolist produce and at what price?
(b) What is the socially optimal quantity of flowers that should be sold?
5.
Firm A is an incumbent monopolist in a market with total demand given by
Q
D
= 20 –
2p. Firm A has zero costs. Firm B is considering entering the market with zero
marginal cost. Firm B would incur a onetime entry fee of 20 dollars if it were to
enter the industry. The goods produced by the two firms are identical.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Winter '09
 Brian
 Economics, Game Theory, Price Discrimination

Click to edit the document details