Chapter14: Monopoly
Section: Chapter Questions
Problem 14.6P
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Transcribed Image Text:Consider a price discriminating monopolist facing two markets for its good. The denmand
equations faced by the monopolist and its cost function are:
Market 1: Q1 = 55 – PI
Market 2: Q2 = 70 – 2P2
Cost Function: TC(Q) = 100 + 5Q, where Q =Q1+Q2.
a. If the monopolist can maintain the separation between the two markets, calculate the
optimal output level that the firm should produce for each market to maximize profits.
b. Determine the prices the monopoly should charge in each market, and calculate the
profit of the monopoly.
c. Construct a graph to represent your findings in item #3.a and #3.b.
d. If the monopolist cannot maintain the separation between the two markets, calculate
the optimal output level and determine the price will this be sold?
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