Monopoly pricing, Business Economics

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1. (classical monopoly pricing) A monopolist faces a demand curve q (p) = 100   p:

(a) If its cost function is C (q) = 2q; what is the optimal level of price and quantity?

(b) If its cost function is C (q) = 10+2q (i.e. the rm has a xed cost 10), what is the optimal level of price and quantity?

2. (price discrimination) A monopolist sells bikes in two markets with demand curves given by

 q1 (p1) = 100   2p1; q2 (p2) = 100   p2:

The monopolist has a constant marginal cost c = 20 and has no xed cost. If the monopolist can price discriminate, what price should it charge in each market?


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