Question

Assume a monopolist is able to practice price discrimination in two separate markets. Each market has a different demand curve for the monopolist’s product:

Q1 = 1000 – 4P (Market 1: Maine)

Q2 = 1200 – 4P (Market 2: Texas)

Let the short-run total cost function for the monopolist be SRTC = 100 + 0.25Q²

a. Find the quantity and price at which the monopolist will sell in each market, and figure out the firm’s total profits from the combined markets.

b.Examine the case where the monopolist cannot price discriminate. Find the price and quantities at which it will sell, and the firm’s total profit. Comment on the difference in results.

Answer 1