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A monopolist has two types of customers. There are 100 of Type A, who will every pay up to $10 for a single unit of the good, and 50 of Type B, who will every pay up to $8. Neither is willing to purchase additional units at any price. If it must charge a uniform price, find the price.
a. Suppose that spending $80 on advertising will attract 100 more Type B customers. Should the monopolist advertise? If so, what will happen to price?
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