Question #87618

Suppose the market demand can be separated into two distinct markets, where inverse demand function of the two markets are Q1 = 9 -0.05P1 and Q2 = 16 -0.2P2 , respectively. The monopolist’s cost function is C = 35 + 20Q, where Q is the total output of the monopolist.

a. Determine the equilibrium prices and quantities in each market and the overall profits that result from the actions of a price-discriminating monopolist.

b. Determine the price elasticity of demand in each market, evaluated at the equilibrium prices and quantities.

c. What is the relationship between the price elasticity and demand in each market and the prices prevailing in each market? Explain the theory and intuition .

d. Draw a graph to show how the price and quantities are determined in each market.

a. Determine the equilibrium prices and quantities in each market and the overall profits that result from the actions of a price-discriminating monopolist.

b. Determine the price elasticity of demand in each market, evaluated at the equilibrium prices and quantities.

c. What is the relationship between the price elasticity and demand in each market and the prices prevailing in each market? Explain the theory and intuition .

d. Draw a graph to show how the price and quantities are determined in each market.

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