Question
A monopoly sells in two separate markets such that goods sold in one market are never resold in the other. The demand curve for the
A monopoly sells in two separate markets such that goods sold in one market are never resold in the other. The demand curve for the product is given by PA = 137 - 2QA in market A and PB = 275 - 5QB in market B. The monopoly faces a constant marginal cost of production, MC = 5, and no fixed costs. The monopoly can charge different prices in the two markets.
(a). What is the profit-maximizing combination of quantities and prices for the monopoly?
(b). What if the monopolist couldn't price discriminate but noticed that type Aconsumers were coupon users. What would be the monopolist's profit-maximizing price?
(c). Suppose the price elasticity in market A is -1.08 and the price elasticity in market B is -0.80. What can the monopolist do in terms of output reallocation that will surely raise his profits?
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