# Question 4: Suppose that, each period, a monopolist faces market demand P = 100 – 10Q and has constant marginal cost MC= 20 (with no fixed costs).

Question 4:

Suppose that, each period, a monopolist faces market demand P = 100 – 10Q and has constant marginal cost MC= 20 (with no fixed costs). a. If the monopolist cannot price discriminate, then how much does it sell? How much profit does the monopolist earn? What is the maximum per-period license fee the government could charge the monopolist (assuming the government wants it to stay in business?). What is the deadweight loss due to monopoly power?

b. If the monopolist can perfectly price discriminate, how much does it sell? How much profit does the monopolist earn? What is the maximum per-period license fee the government could charge the monopolist (assuming the government wants it to stay in business?). What is the deadweight loss due to monopoly power?

c. Suppose now that this market consists of 100 identical consumers, each with individual demand P = 100 – l000q. Suppose further that the monopolist may resort to a two-part tariff. What is the profit-maximizing two-part tariff? How much does the monopolist sell? How much profit does the monopolist earn?

d. Now suppose the market grows and that 50 additional identical consumers, each with individual demand P = 80 – 500q enter the market. What is the new optimal two-part tariff? How much does the monopolist sell now? And how much profit does she earn?

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