A price discriminating defense monopolist manufacturer has a marginal cost of MC = $200. The monopolist can segment the market into two different groups: Customer A has a demand P = 400 -.5Q and MR=400-Q. Customer B demand is P = 300 – Q and MR=300-2Q.
- How many units and at what price should the producer sell to each customer, using the MR=MC rule for each?
- Is price discrimination better for the producer than a standard price? To find out, Pick any one standard price (somewhere between the two prices) for all customers and examine if the revenue would be higher or lower with a standard price?