2. Suppose that Golden Queen company can produce chocolate at a constant marginal cost equal to Rp20,000 and fixed cost of Rp10 billion, or the company's total cost can be expressed by: C = 10,000,000,000 + 20,0000 You are asked to advice the CEO as to what prices and quantities Golden Queen should set for sales in Java and Sumatera Island. The demand for Golden Queen chocolates in each market is given by: Q = 4,000,000 - 100P, and Qs = 1,000,000 - 20Ps where the subscript J denotes Java Island and S denotes Sumatera Island. Assume that Golden Queen company can restrict the possibility for anyone to take advantage of different price level set in each island. Page 1 of 3 a. What quantity of chocolates should the company sell in each market, and what should the price be in each market? b. Calculate the total profit of Golden Queen company from doing the price discrimination in question (a) and prove that it is indeed the maximum profit. c. At the equilibrium, calculate the price elasticity of demand in each market. What correlation can you observe from the different price set by the company and its demand elasticity? d. If Golden Queen company now is no longer able to restrict number of reseller in each island and forced to charge the same price in each market, what would be the total quantity of chocolates sold in both market and at what price? Compare (b) and (d), which company's profit is higher? [Hints: without price discrimination, company's demand is the total demand, i.e. Q = QJ+Qs) 2. Suppose that Golden Queen company can produce chocolate at a constant marginal cost equal to Rp20,000 and fixed cost of Rp10 billion, or the company's total cost can be expressed by: C = 10,000,000,000 + 20,0000 You are asked to advice the CEO as to what prices and quantities Golden Queen should set for sales in Java and Sumatera Island. The demand for Golden Queen chocolates in each market is given by: Q = 4,000,000 - 100P, and Qs = 1,000,000 - 20Ps where the subscript J denotes Java Island and S denotes Sumatera Island. Assume that Golden Queen company can restrict the possibility for anyone to take advantage of different price level set in each island. Page 1 of 3 a. What quantity of chocolates should the company sell in each market, and what should the price be in each market? b. Calculate the total profit of Golden Queen company from doing the price discrimination in question (a) and prove that it is indeed the maximum profit. c. At the equilibrium, calculate the price elasticity of demand in each market. What correlation can you observe from the different price set by the company and its demand elasticity? d. If Golden Queen company now is no longer able to restrict number of reseller in each island and forced to charge the same price in each market, what would be the total quantity of chocolates sold in both market and at what price? Compare (b) and (d), which company's profit is higher? [Hints: without price discrimination, company's demand is the total demand, i.e. Q = QJ+Qs)