4. Consider two markets for the same good: markets 1 and 2. The demand for the good on these markets are: P₁ = 20 2Q₁ and P2 = 40 - 2Q2 The total cost of producing any output Q is c(Q) = 10 + 8Q where Q = 91 +92. (a) Suppose these two markets are completely separated but cach is served by a per- fectly competitive industry. What will be the prices and outputs supplied to cach of the two markets? (a) Now instead of (a), suppose these two markets are served by a single price- discriminating monopolist. If the markets continue to be separated, what are the profit-maximizing prices charged by the monopolist and outputs. Confirm that the market with the less elastic demand is charged the higher price. (c) Now suppose this monopolist is mandated to charge the same price on each market (or that it is now costless for consumers to buy from any of the markets). What will be the profit-maximizing uniform price charged by the monopolist?
4. Consider two markets for the same good: markets 1 and 2. The demand for the good on these markets are: P₁ = 20 2Q₁ and P2 = 40 - 2Q2 The total cost of producing any output Q is c(Q) = 10 + 8Q where Q = 91 +92. (a) Suppose these two markets are completely separated but cach is served by a per- fectly competitive industry. What will be the prices and outputs supplied to cach of the two markets? (a) Now instead of (a), suppose these two markets are served by a single price- discriminating monopolist. If the markets continue to be separated, what are the profit-maximizing prices charged by the monopolist and outputs. Confirm that the market with the less elastic demand is charged the higher price. (c) Now suppose this monopolist is mandated to charge the same price on each market (or that it is now costless for consumers to buy from any of the markets). What will be the profit-maximizing uniform price charged by the monopolist?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Only part (c) please, thank you!
Transcribed Image Text:4. Consider two markets for the same good: markets 1 and 2. The demand for the good
on these markets are:
P₁ = 20 2Q₁ and P2 = 40 - 2Q2
The total cost of producing any output Q is c(Q) = 10 + 8Q where Q = 91 +92.
(a) Suppose these two markets are completely separated but cach is served by a per-
fectly competitive industry. What will be the prices and outputs supplied to cach
of the two markets?
(a) Now instead of (a), suppose these two markets are served by a single price-
discriminating monopolist. If the markets continue to be separated, what are
the profit-maximizing prices charged by the monopolist and outputs. Confirm
that the market with the less elastic demand is charged the higher price.
(c) Now suppose this monopolist is mandated to charge the same price on each market
(or that it is now costless for consumers to buy from any of the markets). What
will be the profit-maximizing uniform price charged by the monopolist?
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