A Firm is selling its product in 2 markets. In m.1 the demand is given by D1(p1) = 40 2p1 and in m.2 the demand is given by D2(p2) = 50 p2.

The Firm has 0 marginal cost, and 0 fixed cost, so the cost function of the firm is c(y) = 0. (a) Assume that the firm can successfully discriminate between the two markets, but in each market has to set a single price. Find the optimal prices set in the two markets.

(b) Now suppose that the monopolist cannot distinguish between the two segments of the market and has to offer a single price. Compute the optimal price when the monopolist can offer a single common price to both segments of the market. Does the monopolist serve both segments, or only one segment ?