Question

(1 point) A monopolist sells its product to US and Asia. Suppose it can separate the...

(1 point) A monopolist sells its product to US and Asia. Suppose it can separate the market. Suppose it produces the product in 2 factories: Factory #1 and #2. Write down the profit maximizing condition. (no need to proof it.)

(7 points) Suppose the price at which a monopolist can sell its product is P = 1400 - Q , where Q is the number of units sold per period. The monopolist's cost function is C(Q) = 3Q^2  

a) Suppose this firm can practice two-parts tariffs, i) what is the optimal output? ii) what is the price? iii) what is the size of the optimal "membership fee".

b) Suppose this firm can practice perfect price discrimination, i) what is the optimal output? ii) what is the maximum amount of money the firm can charge?

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Answer #1

Q profit maximising condition are

1 MR of market 1 = MR of market 2 = MC

2 Aggregate MR = MC of total output

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