1. A monopolist demand curve and MR curve are separate. There are two different customers with two different elasticities but you still want to maximize profit with MR=MC for each customer separately). A price discriminating defense monopolist manufacturer has a marginal cost of MC = $200. The monopolist can segment the market into two different groups: Customer A has a demand for guns P = 400 -.5Q and MR=400-Q. Customer B demand is P = 300 - Q and MR=300-2Q. How many guns and at what price should the producer sell to each customer, using the MR=MC rule? Why is price discrimination better for the producer than a standard price? Pick any reasonable one price for all and examine if the revenue would be higher or lower?
2. A competitor estimates the following system for his cost and revenue :
demand curve P = 100 -Q
TC = 16+ Q2
MC= 2Q
TR= P(Q)
MR= 100-Q
Some very basic Algebra here.
A. Using the MR=MC standard, how many units should be sold to maximize the profit?
B. What would the price be?
C. What would the TR be?
D. What would the TC be?
E. What would the profit or loss be?
3. Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy only 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand, using the midpoint formula that we used in class? What is the marginal revenue?