Discussion:
You are employed by a hospital that has succeeded through innovation in dividing its markets into three segments; each segment is completely sealed off from the other. The demand curves for the hospital's output are:
Customer group 1: P1= 64-4Q1
Customer group 2: P2= 106-5Q2
Customer group 3: P3= 76-6Q3
Where P1, P2, and P3 are prices in each market: Q1, Q2, and Q3 are the amounts sold in each market. The hospital's total cost function is: TC= 21+16Q, where Q=Q1+Q2+Q3.
A. How many units will the hospital sell to each customer group?
B. What price should the hospital charge to each customer group?
C. What is the hospital's total profit or losses based on the above information?
D. What are the conditions for successful monopoly price discrimination?