Wednesday 25 June 2014
Monopolistic
A monopolistic has two types of customers. There are 100 of Type A, who
will each pay up to $10 dollars for a single unit of good, and 50 of
Type B, who will each pay up to $8. Neither is willing to purchase
additional units at any price. If it must charge a uniform price, find
that price. a. Assume that spending $80 on advertising will attract 100
more Type B customers. Should the monopolist advertise? If so, what will
happen to price?
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