Nicolas Cage, Lord of War, sells guns to two countries that are at war with each other. The guns can be provided at a constant marginal cost of $10. Assume there is no fixed cost. The demand for guns from the two countries can be represented as: QA = 100 - 2p QB = 80 - 4p
a) Why is the weapons producer able to price discriminate? Be specific. (1 point)
b) What price will it charge to each country? (4 points)
1 Because the elasticity of demand in two markets is different and so are marginal revenue
2 see image
Get Answers For Free
Most questions answered within 1 hours.