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A seller produces output with a constant marginal cost MC = 2. Suppose there is one group of consumers with the demand curve P1 – 16 – Q1, and another with the demand curve P2 = 10 – (1/2)Q2.
a) If the seller can discriminate between the two markets, what prices would she charge to each group of consumers? (You may want to exploit the monopoly midpoint rule from Learning-By-Doing Exercise 11.5.)
b) If the seller cannot discriminate, but instead must charge the same price P1 = P2 – P to each consumer group, what will be her profit-maximizing price?
c) Which, if any, consumer group benefits from price discrimination?
d) If instead P1 = 10 – Q1, does either group benefit from price discrimination?

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