Suppose that DryMax is the only drycleaner in town, and it determines that men and women have different demand functions for drycleaning services. It determines that the demand functions are as follows:
Qw = 24 - Pw
Qm = 24 - 2Pm
where Pw and Pm are the prices it charges women and men respectively. Assume that the marginal cost and average cost for both groups is $6.
a. Find the total revenue and marginal revenue functions for men and women.
b. What level will DryMax set for Qw and Qm? What prices will prevail, and what will the drycleaner's profit be?
c. What would total deadweight losses from this monopoly be?
d. Suppose that the local government thinks the pricing practice of DryMax is unfair and passes a law requiring the drycleaners to charge the same price to both groups. What quantity would the monopolist now supply? What would new prices and profit be?
e. What would the new deadweight loss be?