Answer to Question #54748 in Microeconomics for moro
1) What is total market demand for your product?
2) Assume that you must charge the same price to both segments. What is the profit-maximizing price? What are your profits?
3) Imagine now that members of segment A all wear scarlet “A” on their shirts or blouses and that you can legally charge different prices to these people. What price do you charge to the scarlet “A” people? What price do you charge to those without the scarlet “A”? What are your profits now?
1) The total market demand for your product is: Qd = qA + qB = 50 - p + 120 - 2p = 170 - 3p
2) If you must charge the same price to both segments, then the profit-maximizing price will be in the point, where P = MR = MC, MC = C' = 20, so P = 20. Your profits are: TP = TR - C = P*q - C = 20*2200 - 5000 - 20*2200 = -5000.
3) If you can legally charge different prices to these people, the price you can charge to the scarlet “A” people is higher, so your profits will be higher too.
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