1. A monopolist sells travel services to two groups of people with the following demand curves Q1 = 100 -2P1 (and MR1 = 50 -Q1) and Q2 = 60 -P2 (and MR2 = 60 -2Q2). The marginal cost of providing one unit of travel service to either of the groups is the same for the monopolist MC = $10 per unit.
a. Identify whether group 1 or group 2 has more elastic demand.
b. If the monopolist can price discriminate, what will be the prices at which he sells travel services to the two different groups. What will be the quantity sold to each group?
c. Suppose the monopolist isforced to charge a single price to all consumers regardless of the group to which they belong. What will be the new equilibrium prices and quantities? Who benefits from this policy? Who loses?
d. What would the equilibrium prices and quantities be if the market was competitive?