How will this monopoly behave if the law forbids it

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Reference no: EM133401552

Case: The Céréa monopoly manufactures clones.
The demand comes from two different categories of consumers, Siths and Jedis.
The inverse demand functions of the two groups are respectively: ps =100-qs and pj =200-2qj
The total monopoly cost function is C(Q) =0.5Q2
with Q=qs +qj .

Questions:

1. How will this monopoly behave if the law forbids it to discriminate by price? Determine the quantity supplied that maximizes his profit. Calculate the value of this profit.
2. What strategy will the monopoly adopt if the law now authorizes it to discriminate by price? How much will it produce? How will he distribute this volume of production? How much will be its profit to the optimum?
3. Calculate the value of the price elasticity of demand in each market. Check the relationship between marginal revenue, selling price and elasticity of demand.

Reference no: EM133401552

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