The LED Toy Company has a hot new toy called Dabbdo that it sells in two markets. On the cost side the firm has fixed costs of $150,000 dollars monthly. In addition, its variable costs are MC = AVC = $25 per toy. Assume that the LED Toy Company can engage in third-degree price discrimination and its goal is to maximize its profits. The monthly demand in Market 1 where P1 is price in dollars is:  P1 = 55 - Q1, where Q1 is the quantity in thousands of the toy sold in market 1 monthly.  The monthly demand in Market 2 where P2 is price in dollars is: P2 = 35 - 0.5Q2 where Q2 is the quantity in thousands of the toy sold in market 2 monthly And what LED's monthly profits be? ANSWER: ______________________

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Price Discrimination

Price discrimination or differential pricing is based on the principle that the seller will charge the buyer a price based on the buyer’s ability and willingness to pay for the product rather than applying uniform pricing for all.