2) Two types of customers make up the market for Armoyas. Thereare 100 type A customers, each of whom is willing to pay up to $10for an Armoya. There are 50 type B customers, each willing to payup to $8 for an Armoya. No customer wishes to buy more than asingle Armoya. The monopolist cannot differentiate between thetypes of customer. The average and marginal cost of production isconstant at $6/Armoya.
a) What is the selling price of the good, and how much profitdoes the monopolist make?
b) The monopolist is offered the opportunity to advertiseArmoyas at a cost of $80. The advertisement is predicted to attractanother 100 type B customers. Will the advertisement be placed?What is the selling price of the good, and how much profit does themonopolist make?
c) Suppose the advertisement attracts no new customers, butraises the price all existing customers are willing to pay by $1.Will the advertisement be placed? What is the selling price of thegood, and how much profit does the monopolist make?
