A firm is able to sell its product in two different markets. The corresponding demand functions are 1. and the total cost function is 100, P₁ +2Q₁ 2P2+Q2 = 2a TC = = 500 +100, where Q = Q₁ + Q2 and a is a positive constant. Determine, in terms of a, the prices needed to maximize profit (a) with price discrimination (b) without price discrimination. Show that the profit with price discrimination is always greater than the profit without discrimination, irrespective of the value of a.
A firm is able to sell its product in two different markets. The corresponding demand functions are 1. and the total cost function is 100, P₁ +2Q₁ 2P2+Q2 = 2a TC = = 500 +100, where Q = Q₁ + Q2 and a is a positive constant. Determine, in terms of a, the prices needed to maximize profit (a) with price discrimination (b) without price discrimination. Show that the profit with price discrimination is always greater than the profit without discrimination, irrespective of the value of a.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Price-searcher Markets With Low Entry Barriers
Section: Chapter Questions
Problem 7CQ
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![A firm is able to sell its product in two different markets. The corresponding demand
functions are
1.
and the total cost function is
P₁ + 2Q1
2P2+Q2
=
100,
= 2a
TC 500+100,
where Q = Q₁ + Q2 and a is a positive constant. Determine, in terms of a, the prices needed
to maximize profit (a) with price discrimination (b) without price discrimination. Show that
the profit with price discrimination is always greater than the profit without discrimination,
irrespective of the value of a.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F59e103a3-6bf8-4294-a82c-02330806f7e2%2Fd0d832e9-5ff5-4820-8fa6-51815fa00b82%2Fimc77bi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A firm is able to sell its product in two different markets. The corresponding demand
functions are
1.
and the total cost function is
P₁ + 2Q1
2P2+Q2
=
100,
= 2a
TC 500+100,
where Q = Q₁ + Q2 and a is a positive constant. Determine, in terms of a, the prices needed
to maximize profit (a) with price discrimination (b) without price discrimination. Show that
the profit with price discrimination is always greater than the profit without discrimination,
irrespective of the value of a.
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