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Suppose we have two types of consumers (for simplicity we’ll assume that there is one person of each type). They have inverse demand curves given by: p1 =110−2q1 and p2 =70−4q2. Initially, we will assume that the monopolist can tell them apart and that consumers cannot change or fake their type. Let the marginal cost of production be equal to 10. Label group 1 as the “high type” and group 2 as the “low type.”
(A) Solve for the optimal (V1, q1) and (V2, q2) that satisfies the incentive compatibility constraints.
(B) What rents do the low-type consumers earn in any equilibrium? What about the high-type consumers?
(C) How does welfare compare to the case when the monopolist can tell the two groups apart? What drives the difference?
Describe a time in your life where you outperformed your expectations in a class or under-performed in relation to your expectations. What did you do that helped you succeed? What could you have done that would have made your performance better?
q. assume the united states exports 2000 computers at a cost of 3000 each and imports 200 uk autos at a cost of
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which revealed that the buyers were, on average, willing to pay a premium of $295 for an IBM computer.
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