Suppose that a monopolist sells its product in two countries; Japan and Canada. The monopolist’s marginal cost is $60 and total fixed cost is $100. The direct market demand equations in the two countries are as follows: QJ = 200 − 2PJ and QC = 100 − 0.5PC; where the subscript J denotes Japan and the subscript C denotes Canada. Suppose that the monopolist cannot prevent resale, i.e, the monopolist must charge a single price for both countries. a) Derive the direct total market demand equation, QD = f(P). b) What would be the profit-maximizing quantity (Q*), price (P*), and profit (π*)?
Suppose that a monopolist sells its product in two countries; Japan and Canada. The monopolist’s marginal cost is $60 and total fixed cost is $100. The direct market demand equations in the two countries are as follows: QJ = 200 − 2PJ and QC = 100 − 0.5PC; where the subscript J denotes Japan and the subscript C denotes Canada. Suppose that the monopolist cannot prevent resale, i.e, the monopolist must charge a single price for both countries. a) Derive the direct total market demand equation, QD = f(P). b) What would be the profit-maximizing quantity (Q*), price (P*), and profit (π*)?
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
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Suppose that a monopolist sells its product in two countries; Japan and Canada. The monopolist’s marginal cost is $60 and total fixed cost is $100. The direct market
QJ = 200 − 2PJ and QC = 100 − 0.5PC;
where the subscript J denotes Japan and the subscript C denotes Canada.
Suppose that the monopolist cannot prevent resale, i.e, the monopolist must charge a single
a) Derive the direct total market demand equation, QD = f(P).
b) What would be the profit-maximizing quantity (Q*), price (P*), and profit (π*)?
Please answer both a) and b). Thank you.
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