Question: What is the practice by a monopolist of charging each buyer the highest price he/she is willing to pay is called?© BrainMass Inc. brainmass.com October 24, 2018, 9:53 pm ad1c9bdddf
It is known as first degree price discrimination. IT is a form of price discrimination in which a seller charges ...
This solution briefly explains the practice of price discrimination by monopolists. This is completed in over 60 words.
Consolidated Sugar company sells granulated sugar to both retail grocery chains and commercial users (e.g., bakeries, candy makers, etc.). The demand function for each of these markets is:
Retail grocery chains: P1 = 90 - 4q1
Commercial users: P2 = 50 - 2q2
where P1 and P2 are the prices charged and q1 and q2 are the quantities sold in the respective markets. Consolidated's total cost function (which includes a "normal" return to the owners) for granulated sugar is
TC = 25 + 10(q1 + q2 )
(a) Determine Consolidated's total profit function.
(b) Assuming that Consolidated is effectively able to charge different prices in the two markets, what are the profit-maximizing price and output levels for the product in the two markets? What is Consolidated's total profit under this condition?
(c) Assuming that Consolidated is required to charge the same price in each market, what are the profit-maximizing price and output levels? What is Consolidated's total profit under this condition?View Full Posting Details