The Jam Factory makes boutique jams that it sells in specialty stores in two different cities. In City 1, the daily inverse demand function isp₁ = 12 ˆ’ 0.5Q₁and the marginal revenue function isMR₁ = 12 ˆ’ Q₁.In City 2, the inverse demand and marginal revenue functions arep₂ = 20 ˆ’ Q₂andMR₂ = 20 ˆ’ 2Q₂.The firm€™s cost function isC(Q) = 10 + 6Q,whereQ = Q₁ + Q₂.Thus, the firm€™s marginal cost of production is 6 per unit. 

a. Create a spreadsheet with columns for Q₁, Q₂, p₁, p₂, MR₁, MR₂, and MC. Put the values 1 to 12 in increments of 1 in the Q₁ column and put the same values in the Q₂ column. Fill in the appropriate formulas in the other cells, noting that the MC column has the value 6 for each quantity. The Jam Factory price discriminates by charging a different price in each city. Find the profit-maximizing quantities and prices. Verify that the marginal revenues are the same in each city at the profit-maximizing quantities. Determine the firm€™s profit. 

b. Add two columns to your spreadsheet showing the price elasticity of demand in each city for each price-quantity combination. Verify that your results are consistent with Equation 10.5.

Equation 10.5

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1+1/(-1.0357) 1+1/(-1.0263) 1+1/€A 1+1/€B $39 2 1.345 2 $29 рв PA