Question
A computer company sells computers in two markets, domestic and foreign. Because of differences in the power supplies, a computer bought in one market cannot
A computer company sells computers in two markets, domestic and foreign. Because of differences in the power supplies, a computer bought in one market cannot be used in the other market. The inverse demand for the two markets is respectively Pd = 20, 000 20Q; Pf = 25, 000 50Q. The producer's long-run average cost function is AC(Q) = $10, 000 and its long-run marginal cost function is MC(Q) = $10, 000.
a) Calculate expressions for the marginal revenue for each market.
b) What is the quantity of computers to sell in the domestic market that maximizes profits? What is the quantity of computers to sell in the foreign market that maximizes profits? What will be the prices in both markets? What will be the profits earned by the producer overall?
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