Suppose a Monopoly Sells to Two Identifiably Different Types of Customers,A

question 133

Multiple Choice

Suppose a monopoly sells to two identifiably different types of customers,A and B,who are unable to practice arbitrage.The inverse demand curve for group A is P_A = 10 - Q_A,and the inverse demand curve for group B is P_B = 18 - Q_B.The monopolist is able to produce the good for either type of customer at a constant marginal cost of 2,and the monopolist has no fixed costs.If the monopolist practices group price discrimination,the profit-maximizing prices charged to each type of customer are

• A) P_A = 6, and P_B = 10.
• B) P_A = 4 and P_B = 8.
• C) P_A = 10, and P_B = 6.
• D) P_A = 8, and P_B = 4.

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Definitions:

Useful Life

The estimated period over which a fixed asset is expected to be usable by the company, affecting its depreciation calculation.

Depreciation Percentage

The rate at which a company depreciates an asset, expressed as a percentage of its total value.

Double-Declining-Balance

An accelerated method of depreciation which doubles the usual rate of depreciation of assets, allowing for faster write-offs.

Units-Of-Output

A depreciation method that allocates the cost of an asset over its useful life based on the units it produces, reflecting the asset's wear and tear more accurately.