A monopolist faces two groups of consumers. Each group has the following demand:
Group 1: P = 20 – Q1
Group 2: P = 16 – Q2
The production cost of the monopolist is given as MC = Q = Q1 + Q2.
1. Suppose the monopolist cannot separate the two groups of buyers, but he can observe and charge the marginal utility of each unit of purchase as in the case of 1st degree price discrimination. How many units will the monopolist sell to the two groups of consumers if the monopolist practices first degree price discrimination?
2. Assume the monopolist can separate each consumer of his product into the relevant group and then charge that consumer the price of the good for that class of buyer. How many units of the good will the monopolist sell to each consumer group?