A monopolist faces two separate markets with the demand curves given as

D₁(p₁) = y₁ = 100− p₁

D₂(p₂) = y₂ = 100−2 p₂

with D₁ = y₁ and D₂ = y₂ giving the quantities and p giving the price on the market. Let the monopolist’s costs be given as C(y) = 20y.

1) Assume that the monopolist can price discriminate the market into two markets, by charging a different price in each market, according to the third-degree price discrimination

a) Write down the specific revenue functions R₁(y₁) for the first market and R₂(y₂) for the second market.

b) Write down the specific marginal revenue functions MR₁(y₁) for the first market and MR₂(y₂) for the second market.

c) What are the profit-maximizing quantities and prices on the markets? Do they differ in both markets? Interpret your answer economically.

2) Evaluate the monopoly, and perfect competitive markets in terms of efficiency with an explanation.