ajaz_eco204_2009_HW_15

ajaz_eco204_2009_HW_15 - University of Toronto, Department...

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2010 S. Ajaz Hussain ECO 204 2009 – 2010 S. Ajaz Hussain HW 15 Please help improve the course by sending me an e mail about typos or suggestions for improvements _____________________________________________________________________________________ Note: Please don’t memorize these solutions in the expectation that similar questions will appear on tests and exams. Instead, try to understand how to derive the answer as you’ll be tested on techniques and applications, not on memorization. Moreover, tests and exams will cover topics and techniques that may not be in these practice problems. You are urged to go over all lectures, class notes and HWs thoroughly. Question 1 1 In the lecture on 2 nd degree price discrimination, we did the two part tariff problem with parallel demand curves: We saw that if the company wants to serve both types, the access fee ܣ must be equal to the consumer surplus of the low type. When the low and high type demand curves are parallel, it is easy to see which type is the low type. However, when the demand curves cross, it is not apparent at the outset which type is “low”. For example, consider the following two figures: 1 Note to self: for summer 2010 version, do two part tariffs with quasi linear utility and non
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ajaz_eco204_2009_HW_15 - University of Toronto, Department...

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