Question

Suppose that there are two individuals A and B. A's (inverse) demand is given by PA = 50–2QA and B's inverse) demand is given by PB = 70 - 4QB. Suppose that the monopolist can first degree price discriminate. c. Suppose now that the monopolist has costs given by C(Q) = . What is the optimal two-part tariff that he would charge each consumer? What is the optimal block pricing scheme for each of the consumers? Calculate total monopolist profits (10 pts) d. Suppose that the monopolist has costs of C(q) = . Suppose that there is one individual of type A and three individuals of type B. What is the optimal block pricing scheme for each type of consumer? Calculate total monopolist profits. (5 pts)

Answer 1

To determine the optimal two-part tariff and block pricing scheme for each consumer in a monopolistic market, we need to consider the inverse demand functions and calculate the monopolist's profits. Multiple consumers can be factored in by analyzing their respective demand functions.

Step-by-step explanation:

To determine the optimal two-part tariff and block pricing scheme for each consumer in a monopolistic market, we need to consider the inverse demand functions of consumers A and B. A two-part tariff involves charging a fixed fee and a per-unit fee, while a block pricing scheme involves charging different prices for different levels of consumption. The monopolist's profits can be calculated by subtracting the total costs from the total revenue. Similarly, when considering multiple consumers, the optimal block pricing scheme for each type of consumer can be determined by analyzing their respective inverse demand functions.