A firm with market power can divide its sales into two submarkets, the demands andmarginal revenues of which are shown in the following diagram.$Price, marginal revenue, and marginal cost (dollars)0.800.700.600.500.400.300.200.100510MRA15MRB20Quantity25DA3035MC = ATCDB40(a) How many quantities of output should the firm produce?145Q(b) How many quantities should be sold to market A? How many quantities shouldbe sold to market B? What price should be charged in each market?(c) Calculate the price elasticities at the prices charged in each submarket. Do theseprice elasticities have the expected relative magnitudes? Explain.(d) What is the amount of profit generated by the firm?

The monopolist maximizes its profit by selling the amount of quantity where MC=MR for that quantity…

(a) How many quantities of output should the firm produce? b) How many quantities should be sold to market A? How many quantities should be sold to market B? What price should be charged in each market? c) Calculate the price elasticities at the prices charged in each submarket. Do these price elasticities have the expected relative magnitudes? Explain. (d) What is the amount of profit generated by the firm?

(a) How many quantities of output should the firm produce? b) How many quantities should be sold to market A? How many quantities should be sold to market B? What price should be charged in each market? c) Calculate the price elasticities at the prices charged in each submarket. Do these price elasticities have the expected relative magnitudes? Explain. (d) What is the amount of profit generated by the firm?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 10PA

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