F13 IM PS8 Solutions - Professor James A. Hornsten ECON...

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Professor James A. HornstenProblem Set #8 SolutionsECON 202: Introduction to MicroeconomicsPricing, Imperfect Competition & AntitrustNorthwestern UniversityFall 2013Due in class at 12:00PM, Monday, November 181.THIRD DEGREE PRICE DISCRIMINATIONSuppose the total demand for movie tickets can be broken down into two segments. The adult segment isdescribed by PA= 100 – QA, while the student segment is described by PS= 60 –½QS.The constantmarginal (and average total) cost of production is 20.The market is served by a monopoly.a. Find the profit if the monopoly does not distinguish the groups and just charges a uniform price of50 to all customers.A.
b.Find the profit if the monopoly does distinguish the groups and uses 3DPD. (It can prevent resale).
c.Read the article fromThe Economistabout pricing, and then use the 3DPD model from part (a) toshow why it's good advice for a salesperson to “walk away” from some potential student clients.
Profit$MRDresidualMCATCFirm Output, qqSR

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