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A. What are the prot maximizing prices and quantities in each market? [If you wonder about magnitudes, you can think of Q as thousand subscriptions,
A. What are the prot maximizing prices and quantities in each market? [If you wonder about magnitudes, you can think of Q as thousand subscriptions, but do not multiply or divide Q by 1,000.]. B. What is the elasticity of demand at the optimal price/quantity points in the two markets? In which market is demand more elastic (again, at the optimal price/quantity points)? C. Do your ndings under A. (prices) and B. (demand elasticities) match what we learned about elasticities and price discrimination in class? D. As a consequence of a new satellite that the Pentagon recently deployed, people in California now receive Transat's NY broadcasts and people in NY receive the California broadcasts. As a result, anyone in NY or California can receive Transat's broadcasts by subscribing in either city. Thus, Transat can charge only a single price. What price should it charge and what quantities would be sold in each market? [I-Iint: Be careful to add up quantities, not prices, to nd total demand. Then re-arrange to derive inverse total demand and marginal revenue] E. In which of the above situations (A or D), is Transat better off? For full credit show the different levels of prot. F. Explain intuitively why Transat is better off under A as compared to D. [If you did not nd this result in D., nevertheless explain intuitively why you'd expect Transat to be better off under A.]
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