The Price Unlimited Corporation Has Invented The Engine Of...

The Futures Unlimited Corporation has invented the engine of rocket car. As the inventor, the company currently has a patent on this specific product. Only this firm has the exclusive right to control and distribute the quantity of this certain isotope of plutonium on the market. Therefore it is enjoying a monopoly and will maximize its profit. The profit maximizing behavior of a monopolist is explained below: Profit (Ï€) = Total Revenue (TR) – Total Cost (TC) = PÃâ€"Q – TC According to the FOC of profit maximization, we get dÏ€/dQ = (d(TR))/dQ - (d(TC))/dQ [Here P is not fixed] = MR – MC = 0 Therefore MR = MC As a result, a monopolist sets a price where its MR is equal to its MC. From the above figure, we can determine that the†¦show more content†¦A monopolist can also perform price discrimination. When different prices are charged by a seller for essentially the same product it is known as price discrimination. The monopolist often wants to segment the market according to the price elasticity of demand (e) and charge higher prices for those consumers with lower elasticity of demand, according to the mark-up formula. Therefore Futures Unlimited Corporation can also discriminate its price. Direct price discrimination can again be sub-divided into three categories – first-degree price discrimination, second-degree price discrimination, and third-degree price discrimination. With first degree price discrimination, every firm would like to charge a different price to each of its customers. If possible, the firm would charge each consumer the maximum price t hat consumer is willing to pay for each unit bought. The maximum price the consumers are willing to pay is known as the customer s reservation price. The act of charging each customer his or her reservation price is called first degree price discrimination or perfect price discrimination. In second degree price discrimination, price varies in according to quantity demanded. Within some markets, each consumer purchases many units of the good over any given period, and the consumer s demand declines with the number of units purchased. In this situation, a firm can discriminate according to the number consumed. This is