a) In your own words or using an example, describe eachcondition and its relevance for the three conditions for profitableprice discrimination (1. have market power, 2. be able to identifysubmarkets, and 3. be able to separate submarkets).
b) Suppose a perfectly price-discriminating firm faces demandfunction:
? = 22 − ?
And has cost function: ? = 25 + 4? + (1 /2) ?^2
Identify the quantity he sells, the price(s) he charges, and theprofits he attains. Also, solve for this firm’s quantity, price,and profit under uniform pricing. Verify that perfect pricediscrimination increases profit and total surplus relative touniform pricing.
