Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 16, Problem 16.7P
a)
To determine
To find:Equilibrium price and number of pelts to be traded.
b)
To determine
To know:Equilibrium in pelt market.
c)
To determine
To know:Equilibrium in pelt market.
d)
To determine
To plot:Graphical representation of equilibrium in market.
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Road Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets,Bangladesh and Sri Lanka. Demand for Bicycles in thesetwo markets is given by the following Functions:
Bangladesh Q1 = 12 – P1
Sri Lanka Q2 = 8 – P2
Where Q1 and Q2 are respective quantities sold (in thousands) andP1 and P2 are the respective prices (in Pak. Rupees per unit) in the two markets. Total cost function is
C = 5 + 2 (Q1+ Q2)
Determine the company’s total profit function. Also,
(i) What are the profit maximizing levels of price and output for the two markets?
(ii) Calculate the marginal revenues in each market.
Now consider two cases:
(i) Company is effectively able to price discriminate in thetwo markets. What will
be the total profits?
(ii) Suppose the company does not engage in price discrimination. By charging thesameprice in the two markets what are the profit…
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