Question

Suppose the monopolist able to successfully price discriminate between two groups by charging one group $75 and charging $35 to the other group.

c. What are the firm's profits if it charges the two prices as mentioned above?

All answers on g was wrong, so I was really confused.

Answer 1

To determine the profits made by a monopolist that price discriminates by charging $75 to one group and $35 to the other, the quantity sold at both prices and the production costs are required. Total revenue is the sum of the revenue from both groups minus the total cost of production. Without the quantity and cost details, the exact profit cannot be calculated.

Step-by-step explanation:

To calculate the firm's profits when it is able to successfully practice price discrimination and charge two different groups $75 and $35, you would need additional information about the quantity sold to each group and the cost of production. Total revenue is calculated by multiplying the price charged to each group by the quantity sold to that group (if these numbers were provided). Then, you subtract the total cost, which is the quantity on the horizontal axis multiplied by average cost on the vertical axis, from the total revenue to determine profits. As in the example provided, if a monopolist charges $800 for 5 units, and the average cost is $330 for 5 units, the profit would be calculated as follows:

Total Revenue: 5 units x $800 = $4000
Total Cost: 5 units x $330 = $1650
Profit: $4000 - $1650 = $2350

In your case, you would need to know the quantity sold at both price points and the cost of production to perform a similar calculation to find the profit.

Answer 2

To calculate the firm's profits with price discrimination, we need to know the quantity sold at each price and the cost per unit. The provided information from the reference does not supply these figures for the prices of $75 and $35, therefore, we cannot determine the exact profit. In general, with perfect price discrimination, a monopolist can capture all consumer surplus, leading to maximized profits.

Step-by-step explanation:

To calculate the firm's profits when it charges different prices to two groups through price discrimination, you need information about the quantity sold at each price besides the prices themselves. Profits equal total revenue minus total costs. Since the exact quantities sold at each price point are not provided in the question, we cannot calculate the precise profit figure. In the example provided in the reference material (Figure 9.6), total revenue calculated by 5 units at $800 each is $4000, and total costs calculated by quantity of 5 units at $330 each are $1650, resulting in profits of $2350. To apply this to the student's question, we'd need similar data on the quantities sold at each price of $75 and $35 and the cost per unit.

If we assume perfect price discrimination, the monopolist captures all consumer surplus, which means the profit is maximized as each consumer pays exactly their willingness to pay. However, without quantities or cost data, we cannot give a precise answer to the profit calculation for the student's scenario.