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(Solved): Could you please give more explanation of part B, I asked once, but I still cannot understand the so ...



Could you please give more explanation of part B, I asked once, but I still cannot understand the solution. If it's possible, please do not skip any steps, thank you!!! Have a good day! 2. An economy has two kinds of consumers and two goods. Type \( A \) consumers have utility functions \( U\left(x_{1}, x_{2}\

2. An economy has two kinds of consumers and two goods. Type consumers have utility functions and Type consumers have utility functions . Consumers can only consume nonnegative quantities. The price of good 2 is and all consumers have income of . There are type consumers and type consumers. (a) Suppose that a monopolist can produce good 1 at a constant unit cost of per unit and cannot engage in any kind of price discrimination. Find its optimal choice of price and quantity. For what value of will it choose to sell to both types of consumers? (b) Suppose that the monopolist uses a "two-part tariff" where a consumer must pay a lump sum in order to be able to buy anything at all. A person who has paid the lump sum can buy as much as he likes at price of per unit purchased. Consumers are not able to resell good 1 . For , what is the highest amount of that a type is willing to pay for the privilege of buying at price ? If a type A does pay the lump sum to buy at price , how many units will he demand? Describe the demand function for good 1 by each type of consumers as a function of and . (c) If the monopolist can separate the two types of consumers and engage in price discrimination, what would be the profit-maximizing choices of and for each type of consumers?


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2. (a)

To find the monopolist's optimal choice of price and quantity, we need to maximize the monopolist's profit function. The profit for the monopolist is given by the difference between total revenue and total cost.

The total revenue for the monopolist is the product of the price (p) and the quantity sold (q):   

The total cost for the monopolist is the product of the unit cost (c) and the quantity sold (q):   

The monopolist's profit function is:   

To maximize profit, the monopolist sets the derivative of the profit function with respect to q equal to zero:         

Therefore, the monopolist's optimal price is equal to the unit cost.
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