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A monopolist with cost function c(Q) Q2 faces a demand function of QA(P) 50 PA in market segment A and QB(P)- 90 - 2PB in market segment B. Suppose the monopolist engages in 3rd degree price discrimination. Calculate monopolist's profit maximizing prices and quantities for each market. a. Suppose now the monopolist has to engage in uniform pricing. What is the monopolist's profit-maximizing price they should set? How do their profits compare to the profits they earn in part (a) above? (Hint: use horizontal aggregation to form the total market demand curve) b. c. Suppose the monopolist can upgrade their plant so that the cost function becomes: c(QA,B)30QB.How much should you be willing to pay to get this upgrade?
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