Consider a US monopoly firm with total cost function TC = 800 + ½ Q²; this firm can sell to US domestic consumers, whose demand is described by QD=120-P, and potentially to foreign consumers as well. a) Suppose this firm sells only to domestic consumers. What price will it charge, and how many units will it sell? What will be its profits? Show your work. b) Now suppose foreign demand for this firm's product is perfectly elastic at the price P'=60. If the firm can price-discriminate, what price will it charge domestically (P) and abroad (P")? How much will it sell to domestic (Q) and to foreign (Q') consumers? What will be its profits? Show your work, and illustrate your answer with a diagram similar to Figure 9-8 from the textbook (projected in class on Wednesday, November 4).

Consider a US monopoly firm with total cost function TC = 800 + ½ Q²; this firm can sell to US domestic consumers, whose demand is described by QD=120-P, and potentially to foreign consumers as well. a) Suppose this firm sells only to domestic consumers. What price will it charge, and how many units will it sell? What will be its profits? Show your work. b) Now suppose foreign demand for this firm's product is perfectly elastic at the price P'=60. If the firm can price-discriminate, what price will it charge domestically (P) and abroad (P")? How much will it sell to domestic (Q) and to foreign (Q') consumers? What will be its profits? Show your work, and illustrate your answer with a diagram similar to Figure 9-8 from the textbook (projected in class on Wednesday, November 4).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The figure that is talked about in part B is also attached.

Part 4: Please don’t dump me!
Consider a US monopoly firm with total cost function TC = 800+ ½ Q²; this firm can sell to US
domestic consumers, whose demand is described by QD=120-P, and potentially to foreign
consumers as well.
a) Suppose this firm sells only to domestic consumers. What price will it charge, and how
many units will it sell? What will be its profits? Show your work.
b) Now suppose foreign demand for this firm's product is perfectly elastic at the price
P*=60. If the firm can price-discriminate, what price will it charge domestically (P) and
abroad (P*)? How much will it sell to domestic (Q) and to foreign (Q*) consumers?
What will be its profits? Show your work, and illustrate your answer with a diagram
similar to Figure 9-8 from the textbook (projected in class on Wednesday, November 4).
c) Now suppose foreign governments impose a per-unit anti-dumping duty on goods
imported from this US firm, in the amount of P-P* (from your answer to part b). How
will this affect the US firm’s pricing and production behavior? Be as specific as you can,
and show your work.

Price
p* > AC* in the
Marginal
cost, MC*
local market
Local price, P*
Average
cost, AC*
AC,
Export demand, D, and export
Export price, P
marginal revenue,
MR
B
Local demand, D*
P< AC, < P* in
the export market
Local marginal revenue, MR*
Q,
Foreign quantity
Local
sales
Exports
FIGURE 9-8
Foreign Discriminating Monopoly The Foreign monopoly faces different demand curves and charges different
prices in its local and export markets. Locally, its demand curve is D' with marginal revenue MR. Abroad, its

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