Question

Question #4

(3^rd Degree Price Discrimination)

A Monopolist selling a cell phone in two separate markets. They must decide how much to sell in each market in order to maximize their total profits.

The demand in the Brazilian Market is :                                  Q_Brazil = 200 – 10P_Brazil

The demand in the United States Market is:                         Q_USA = 60 – 20P_USA

If Total Cost is: TC = 90 + 2(Q_USA +Q_Brazil)

1. Calculate the Price and Quantity if the Monopolist Maximized their profit and sells in both markets? (8 Points)
2. Calculate the Profit if he Monopolist Maximized their profit and sells in both markets? (6 Points)
3. In the absence of 3^rd Degree Price Discrimination and the firm must sell at the same price in both markets, what is the price, quantity and total profit? (6 Points)

Answer 1

We are given case of a monopolist selling cell phones in markets of brazil and usa

Part (a)

If monopolist maximizes its profits and sells in both the markets

for that above conditions should be met

Part (b)

Part (c)

Now the monopolist has to sell the good at same price in both the markets and not able to practice third degree price discrimination