Question

2. A monopolist can produce any level of output at a constant marginal cost of $5 per unit. Assume the monopoly sells its goods in two different markets separated by some distance. The demand curve in the first market is given by qı = 65 – pı,and the demand curve in the second market is given by 92 = 90 – 2p2. (a) 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 each market? What are the total profits in this situation? (b) What is the price elasticity of demand at the monopoly output in each market? (C) Now suppose the monopolist cannot maintain separation between the two mar- kets. Specifically, it costs consumers only $4 to transport goods between the two markets. What would be the monopolist's new profit level in this situation? (d) How would your answer to part (c) change if the transportation costs were zero?

Answer 1

65-P (a) 65-9 90-2 P2 2 P2 So-22 P2 = 45- P2 22-Tc PI21+ IT (65-६)१। + (५5 - )१2- 58 1 2 6521-2 4522-93 5181+82) 65-221 60-2 2 45-292 22 49-22 put 02 022 G0-22 21 30 22 = 40 ID

65-2 35 65-30 45- 45-40 45-20= 25 21+22 P21+ Pr22- PI 21+ P222 T 5Q 5121+ 22) 5 (30140 35 X30+25 x40 1050 + 1000- 350 2으5으 350 1300

ニる 65-P 1LG 35 JEl- 1-1.161 1 16 go-2P2 こてる d22 E2 aPr 22 25 40 -1.25 -1.25 E2 1-25 E E2 Thun and

Now PI = 65-2) 22 45- 2 4 P1 P2 65-21-45- 22)=4 4s t 22 =4 65-21 2 21 t 20 4-20 21 22 21-16 221-32

- 5 8 IT= 5121+22) LE5-D1 45-22 2 4522-23 65 21-2 + 521-592 2 + 4022- 6021- from CD +22-32)2 40(221-322 6021- 6021-E 8021 1280- 1 है[22। -22) 2 1280 14021-2 1221-32)2 221-32) 2-0) 1 . 140-2 221-21221-3 2) 140 22.1 140 204-62) put 204-62 204 = 34 9 1 = 34 21

from 221-32 오2 7 2(342-32 6-32 PI= 65-2 3 1 = 65-34 45 2 P 2= 36 45 2F 45-18 5 L21+22 PI 21 t P2 22 534 t36 31X34 27 x36 3 50 1654+ 972 3 50 2026- 1676 Pr-P2 hen 1C wwch mean maint ain monopolist nos not can the sepanarion betwcan turo tthe Thus han to change ynifrm price he malkes. ommon pnica oy to tal oould be demand ttee So 오1t22 6 5-P1t 9-2P PI=P2P 2 P 65-Pt 9o 155-3P

L55-3P 3 P 155-O 155 Q 3 -. MR 1552 Proit max. Cond" ह -स 20 SST 155-20 L 5 155-26 20 155-15 140 P 155-70 85 28.33 P 50 PO (28.33-5) 0 = 1633-1 |P-5)3 11 am Il