A monopoly sells its goods in the U.S. and Japanese markets. The American inverse demand function is: PA = 140-3QA and the Japanese inverse demand function is: PJ = = 100 - 2QJ Assume that the firm's marginal cost of production is m = 50 in both countries. (a) If the firm can price discriminate (prevent resale between markets), what price will it charge, how much will it produce, and how much profit will it earn in each market. (b) Resolve the problem assuming that the firm cannot price discriminate (e.g., PA = PJ = p). (c) Compare your results from (a) and (b). How does price discrimination impact the firms' profits? How does it impact consumers in the American and Japanese markets?

A monopoly sells its goods in the U.S. and Japanese markets. The American inverse demand function is: PA = 140-3QA and the Japanese inverse demand function is: PJ = = 100 - 2QJ Assume that the firm's marginal cost of production is m = 50 in both countries. (a) If the firm can price discriminate (prevent resale between markets), what price will it charge, how much will it produce, and how much profit will it earn in each market. (b) Resolve the problem assuming that the firm cannot price discriminate (e.g., PA = PJ = p). (c) Compare your results from (a) and (b). How does price discrimination impact the firms' profits? How does it impact consumers in the American and Japanese markets?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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