A monopolistic firm operates in two separate markets. No trade is possible between market A and market B. The firm has calculated the demand functions for each market as follows:

Market A p = 15 - Q; Market B p = 11 - Q

The company estimates its total cost function to be TC = 4Q. Calculate:
a. quantity, total revenue and profit when the company maximizes its profit and charges the same price in both markets
b. quantity, total revenue and profit when the company charges different prices in each market and maximizes its total profit


If revenue and cost schedules are calculated:
a. Q = 9; p = 8.5; TR = 76.5; TC = 36; profit = 40.5
b. Market A:
Q = 5 to 6; p = 9 to 10; TR = 50 to 54; TC = 20 to 24; profit = 30
Market B:
Q = 3 to 4; p = 7 to 8; TR = 24 to 28; TC = 12 to 16; profit = 12
Combined profit = 42

If equations are used:
a. Q = 9; p = 8.5; TR = 76.5; TC = 36; profit = 40.5
b. Market A:
Q = 5.5; p = 9.5; TR = 52.25; TC = 22; profit = 30.25
Market B:
Q = 3.5; p = 7.5; TR = 26.25; TC = 14; profit = 12.25
Combined profit = 42.5

Economics

You might also like to view...

Explain how the marginal product and average product of labor change as the labor employed increases (a) initially and (b) eventually

What will be an ideal response?

Economics

Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. Which bundle will Max choose?

A) a B) b C) c D) d

Economics

Project A and Project B both have expected values of $5,000. Project A has a standard deviation of $1,000, while Project B has a standard deviation of $3,000. Comment on the desirability of these projects

What will be an ideal response?

Economics

An individual's labor supply curve

A. Slopes downward initially, and then may bend upward. B. Always slopes downward. C. Slopes upward initially, and then may bend backward. D. Always slopes upward.

Economics