Economics Need to solve all the questions. Handwriting is okay but please write everything clearly. Please also draw the graph and mark the area if it is required

Economics Need to solve all the questions. Handwriting is okay but please write everything clearly. Please also draw the graph and mark the area if it is required.

 

Problem 1. (First Degree Price Discrimination)

Suppose the market demand faced by a monopoly can be represented by

P = 32 – Q

Firm’s cost is TC = Q² + 24

 

• What is the monopoly’s Marginal Revenue curve?

 

• How much will the monopoly produce?

 

• What is the monopoly’s Producer Surplus?

 

• What is the CS?

 

 

Problem 2. (Third Degree Price Discrimination)

 

American Tire and Rubber Company sells identical radial tires through two channels

• sell under the firm’s own brand name;
• sell to discount stores for private labeling.

Marginal Cost is a constant $10 per tire, regardless of the sub-market in which the tire is sold. The firm has estimated the following demand curves for each market:

 

P1 = 70 – 0.5 q1 (brand name)

P2 = 20 – 0.2 q2 (private brand)

 

The firm’s total cost function is given as: TC = 10Q and Q = q1 + q2

 

If the company can practice third-degree price discrimation, calculate the following in each market:

 

• profit-maximizing price & quantity in each market
• own-price elasticity in each market
• Lerner index in each market