Question

Students in Bangladesh have demand for an economics textbook given by Q = 25 - P, while students in the US have demand for the same textbook given by Q = 45 - P. Texts can be printed and shipped to either country for a marginal cost of 9. Suppose the publisher can prevent re-selling across countries.

What is the profit-maximizing price in Bangladesh? (Input a number, such as "56", with no dollar sign or quotation marks.)

Refer to the previous question regarding the textbook publisher. Now suppose that the publisher cannot prevent buyers from re-selling across countries.

a) What is the profit-maximizing, single world price of the textbook? You must show the main steps in your solution to receive full credit. (Tell us what you are doing.)

b) Without doing any further calculations, what could we say about the consumer surplus in Bangladesh and the publisher’s profits for the case of the group price discrimination strategy compared to the case with a single world price?

Your answer should take the form:

“Consumer surplus in Bangladesh would be (higher/lower/the same) with group price discrimination because...”

“Publisher profits would be (higher/lower/the same) with group price discrimination because...”

Answer 1