b. Identify the conditions under which third-degree price discrimination enhances profits.

You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is −3, while group 2’s is −5. Your marginal cost of producing the product is $40.

a. Determine your optimal markups and prices under third-degree price discrimination.

b. Identify the conditions under which third-degree price discrimination enhances profits.

You are the manager of a monopoly that sells a

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