Question

A monopolist sells the same product at the same price into two different markets. The demand for the product in market #1 is denoted D1(p) = 30 − 2p where p is the unit price. The demand for the product in market #2 is given by D2(p) = 80 − 3p. 1. If the monopolist sets a price of $5 per unit, what is the demand in market 1? 2. If the monopolist sets a price of $5 per unit, what is the demand in market 2? 3. If the monopolist sets a price of $5 per unit, what is the total demand? 4. If the monopolist sets a price of $20 per unit, what is the demand in market 1? 5. If the monopolist sets a price of $20 per unit, what is the demand in market 2? 6. If the monopolist sets a price of $20 per unit, what will total demand be? 7. What is the elasticity of total demand at a price of $5 per unit? 8. What is the elasticity of total demand at a price of $20 per unit? 9. Explain why the elasticity of total demand is not defined at a unit price of $15. 10. Assume the monopolist’s cost function is C(q) = cq. If c = 2, what is the optimal price for the monopolist to charge?

Answer 1