1. A firm has segmented its market into the following demand functions:
P1 = 500 – 50Q P2 = 500 – 20Q with a cost function: MC=AC =20
a. Determine the profit maximizing price and quantity and corresponding economic profits if the firm charges all customers the same price.
b. Determine the profit maximizing prices and quantities and corresponding economic profits if it practices third-degree price discrimination.
c. What are the conditions necessary for price discrimination to succeed?