- (45 points) The Celestial Communications is the only cellular phone provider in the city and sells its service to corporate users and regular users. The total cost function of the monopolist is given by: ?(?) = 100 + 2? where, ? = ?? + ??. The two groups have different demands for cellular phone service and their demands are given by
Corporate users: ? = 20 − 2? Regular users: ? = 10 − ??? ??
- (5 points) What quantity should the monopolist sell to the corporate users and at what price?
- (5 points) What quantity should the monopolist sell to the regular users and at what price?
- (5 points) What is the total amount of profit the monopolist will earn from the two markets?
- (6 points) If Celestial Communications charges the same price to both types of users then what is the total profit it can earn?
- (7 points +7 points+ 10 points) Now suppose that Celestial Communications is considering charging two-part tariff to each of the markets. What is the profit maximizing fixed fee and per unit price for each type of user? What is the optimal strategy for the monopolist in term of profit?
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