A monopoly producer of music videos is able to sell these to 10 TV stations and also to 100 individual consumers. Because TV stations have special formatting and quality requirements, producers are able to separate these two types of consumers and sell them essentially the same product at two different prices. You are given the following demand curves per year for these distinct markets:
TV stations: PH = 80 - 0.01QH
Individual consumers: PL = 60 - 0.01QL
where P refers to prices charged to each group and Q refers to quantities demanded by each group. The variable cost of producing music videos (once the video has been shot) is uniform at $4 per video. In addition, there are fixed costs of $20,000 for the shooting of each music video (for design, promotion, and hiring artists).
a. Find the monopolist's profit-maximizing quantity and price if the firm must use uniform pricing.
b. If the producer of music videos can use third-degree price discrimination by charging different prices to each group, find the profit-maximizing price for each group. What is the producer's profit?