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A firm is selling its product in two markets. In market A the demand is given...

A firm is selling its product in two markets. In market A the demand is given by QA = 100 − 2P and in market B the demand is QB = 80 − 4P. The firm’s total cost is C = 10Q where Q = QA + QB is the total output. a) Suppose the monopolist cannot discriminate between markets A and B. What is the total demand ? (1 pt) Find the profit-maximizing price and quantity (2 pt), and calculate the profits (1 pt). b) Suppose now the monopolist can discriminate between markets A and B. Find the profit-maximizing prices (2 pt) and quantities (2 pt) on each market, and calculate the total profit (2 pt). c) Calculate the price elasticities of demand at the equilibrium prices and quantities under price discrimination (i.e. when the monoplist can discriminate). (2 pt) d) What is the relationship between the price elasticities and the prices charged in each

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Answer #1

here PA = 30 PB = 15 and EA = 1.5

EB = 3  

since PA > PB implies EA < EB which means monopolist will sale more output in market A

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