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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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