Part A Suppose that the monopolist can produce a good with total cost TC = 24Q. Assume also that he monopolist sells its goods in two different markets separated by some distance. The demand curves in the first market and the second market are given by Q1 = 120 - P1/2 and Q2 = 360 - 3P2. If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in cach market? Why are the two prices different? Verify the Lemer Index for cach market. Part B Suppose a monopoly faces a demand curve by Q = 154 - P/3. The monopolist has two plants. The first has a total cost function given by TC1, = 3Q21 and the second plant's total cost function is given by TC2 = 2Q22 How much total output will the monopoly choose to produce and how will it distribute this production between its two factories in order to maximize profits? Find monopolist's profits.
Part A
Suppose that the monopolist can produce a good with total cost TC = 24Q. Assume also that he
monopolist sells its goods in two different markets separated by some distance. The demand curves in
the first market and the second market are given by Q1 = 120 - P1/2 and Q2 = 360 - 3P2. If the
monopolist can maintain the separation between the two markets, what level of output should be
produced in each market, and what price will prevail in cach market? Why are the two prices different?
Verify the Lemer Index for cach market.
Part B
Suppose a
has a total cost function given by TC1, = 3Q21 and the second plant's total cost function is given by
TC2 = 2Q22 How much total output will the monopoly choose to produce and how will it distribute
this production between its two factories in order to maximize profits? Find monopolist's profits.
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