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1. Market separation (to avoid seepage or arbitrage) – a monopolist must be able to keep the markets separate either in terms of distance or time to avoid the product being bought in the cheaper market and sold in the more expensive market at prices below the monopoly price.
2. Difference in elasticities of demand in different markets – this makes it possible the charging of a higher price in the inelastic demand market and a lower price in elastic demand market.
3. Total control over production (supply) of a product which has no close substitute. An example of price discrimination are the bus fares charged by KBS at different times of the day. In the mornings and evenings (peak hours) the demand for transport is higher and more inelastic than during the rest of the day. Hence fares are higher in the morning and in the evening than during the rest of the day.
Wilfykil answered the question on February 7, 2019 at 08:10
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Date posted: February 7, 2019. Answers (1)
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Date posted: February 7, 2019. Answers (1)
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enable the firm to maximize profits....(Solved)
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which is completely sealed off from the other.
As part of the analysis, you establish that the total demand for the firm‟s output is given by the
following equation:
Q = 50 – 0.5P
and the demand for the firm‟s output in the two markets is given by the following equations:
Q1 = 32 – 0.4P1 and
Q2 = 18 – 0.1 P2
Where: Q = total output
P = Price
Q1 = Output sold in Market 1
Q2 = Output sold in Market 2
P1 = Price charged in Market 1
P2 = Price charged in Market 2
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Date posted: February 7, 2019. Answers (1)
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enable the firm to maximize profits....(Solved)
You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits. This firm is a monopolist which sells in two distinct markets, one of
which is completely sealed off from the other.
As part of the analysis, you establish that the total demand for the firm‟s output is given by the
following equation:
Q = 50 – 0.5P
and the demand for the firm‟s output in the two markets is given by the following equations:
Q1 = 32 – 0.4P1 and
Q2 = 18 – 0.1 P2
Where: Q = total output
P = Price
Q1 = Output sold in Market 1
Q2 = Output sold in Market 2
P1 = Price charged in Market 1
P2 = Price charged in Market 2
The cost of production is given by C = 50 + 40Q
Where C = total cost of producing bread.
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Date posted: February 7, 2019. Answers (1)
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enable the firm to maximize profits....(Solved)
You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits. This firm is a monopolist which sells in two distinct markets, one of
which is completely sealed off from the other.
As part of the analysis, you establish that the total demand for the firm‟s output is given by the
following equation:
Q = 50 – 0.5P
and the demand for the firm‟s output in the two markets is given by the following equations:
Q1 = 32 – 0.4P1 and
Q2 = 18 – 0.1 P2
Where: Q = total output
P = Price
Q1 = Output sold in Market 1
Q2 = Output sold in Market 2
P1 = Price charged in Market 1
P2 = Price charged in Market 2
The cost of production is given by C = 50 + 40Q
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Date posted: February 7, 2019. Answers (1)
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