Question 7 relies on the following prompt: A monopolist faces market inverse demand of $P = 100 - Q_D$ and therefore a marginal revenue function of $MR = 100 - 2Q$. This monopolist has total cost of production given by $TC = Q^2/4 + 10Q + 200$ and therefore marginal cost given by $MC = Q/2 + 10$. 7. How much more would this firm produce if it could first degree price discriminate (relative to the scenario in which it could not)? (In other words, find the profit maximizing output level under first-degree price discrimination and no price discrimination, and find the difference).
Added by Elisa B.
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To do this, we need to find the monopolist's marginal revenue (MR) and set it equal to the marginal cost (MC). MR = MC 100 - 2Q = Q/2 + 10 Multiplying both sides by 2 to get rid of the fraction: 200 - 4Q = Q + 20 Combining like terms: 5Q = 180 Dividing both Show more…
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