i.
(8) Assuming that Apple is maximizing short-run monopoly profit, what
is its marginal revenue function? What are its profit maximizing price and
quantity?
ii.
(5) What is Apple’s average total cost function? What is the profit at the
current quantity, q*?
iii.
(4) What is the point elasticity of demand at the profit-maximizing level?
iv.
(8) Show Apple’s profit maximizing solution in a diagram.
v.
(5) Calculate the deadweight loss created by the monopoly.

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6
8. (15)
The Wiz-O-Matic company sells Wizzles to two different groups (A and B).
(i)
In general, what conditions must hold for a firm to be able to practice the 3
rd
degree price discrimination?
(ii)
Please
explain
the process by which the firm will determine how many units to
sell in each market and what the price will be in each market. Use the graph
below to illustrate your answer.
Pa
Pb
P
MC
Da
Db
D
total
MRa
Qa
MRb
Qb
MR
total
Qt