A monopolist demand curve and MR curve are separate. There are two different customers with two different elasticities but you still want to maximize profit (with MR=MC for each customer separately). A price discriminating defence monopolist manufacturer has a marginal cost of MC = $200. The monopolist can segment the market into two different groups: Customer A has a demand for guns
P = 400 -.5Q and MR=400-Q. Customer B demand is P = 300 – Q and MR=300-2Q. How many guns and at what price should the producer sell to each customer? Quantify why is price discrimination – two different prices - better for the producer than a one standard price? Pick any reasonable one standard price and examine if the revenue would be higher or lower? Make a conclusion about price discrimination as a strategy.