A monopolist has two sets of consumers. The monopolist faces constant marginal cost of 2. The demand for one set can be described by the Q1 = 5 ? p. For the other set, the demand is Q2 = 10 ? p.
1. Obtain the monopolist's total demand if the two markets are treated as one.
2. Determine the monopolist's profit-maximizing price if both groups are charged the same price? At this price, discuss how much is sold to members of each group? What is the profit?
3. Now suppose that the monopolist can separate the two groups and charge separate profit maximizing prices to each group. What will these prices be? What is the profit in this case?
4. Evaluate your answers in part (2) and (3). Discuss how will price discrimination affect the monopolist's profit?