A monopolist would like to practice third-degree price discrimination. Its first group of customers is represented by the demand equation QD1= 10 – P1. The second group is represented by the demand equation QD2= 10 – 2P2. Assume marginal costs of $4 in both markets. Compare the profit the monopolist would make as a single-price monopolist to what it would earn with third-degree price discrimination. Based on your calculations, does it make sense for this monopolist to price-discriminate?
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