Unformatted text preview: and P 2 is the price paid by the second group. The monopoly's marginal cost is given by MC = 4/9 Q, where Q is the total output produced by the monopoly. (a) Use the equations MR 1 = MR 2 = MC and Q 1 + Q 2 = Q to show that Q 1 = 50 units and Q 2 = 40 units. First, MR 1 = MR 2 Î 2404Q 1 =1202Q 2 Q 2 =2Q 160 Second, MR1=MC 2404Q 1 =(4/9)(Q 1 +Q 2 ) 2404Q 1 =(4/9)Q 1 +(4/9)(2Q 160) Then, Q 1 =50 & Q 2 =2Q 160=10060=40 Substitute these values into the demand formulas to show that P 1 = $140 per unit and P 2 = $80 per unit. (b) MR 1 =MR 2 = MC = $40 per unit....
View
Full Document
 Spring '12
 henryfors
 Economics, Price Discrimination, Supply And Demand, Degree Price Discrimination, Different price elasticity

Click to edit the document details