Question
A private seller can divide the market for his product into two. The markets are market A and market B. The company's average cost is
A private seller can divide the market for his product into two. The markets are market A and market B. The company's average cost is 25, which means that there are no fixed costs. In market A, the demand function is P = -0.6Q + 95 In market B, it is known that nobody buys the product if its price is higher than 68, but if the price of the product is lower than 68, then some of it will be sold, the more the price is lower. It is also known that if the price were 20, then 112 units would be sold. The demand curve in market B is linear. a) What is the demand function in market B? Express it in the form P = ........... Keep the slope number to four decimal places. b) Draw the markets side by side as was done in the book and lecture. Draw the demand curves, the costs and the marginal revenue curves (take care not to make the drawing too small). c) What price maximizes profit in market A? d) What is the highest profit in market B? Show on the drawing the price and quantity that gives the greatest profit.
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