Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage

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Suppose a monopoly sells to two identifiably different types of customers, A and B, who are unable to practice arbitrage. The inverse demand curve for group A is PA 19 - QA, and the inverse demand curve for group B is PB 11 - 2QB. The monopolist is able to produce the good for either type of customer at a constant marginal cost of 1, and the monopolist has no fixed costs. If the monopolist is able to practice group price discrimination, what would be the values of the price elasticities of the two groups at the profit maximizing prices?

Answer

PA 19- QA And MC 1 Now, for monopoly profit maximisation , condition is MRMC , So, firstly calculate total revenue PA(QA) [19 - QA] (QA) 19 QA- QA2 Marginal revenue 19 - 2QA Put MR MC , we get 19-2QA 1 QA 9 Now, put...

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