After having co-opted the Prime Ministers son as Director, the firm "K.K.N. Bhd" was granted the monopoly to deserve the air route between two cities of that faraway kingdom. However this did not guarantee any positive profit because, even if such patronage was the best entry barrier K.K.N. Bhd could buy from the government against potential rivals, it also created high fixed costs since nowadays politicians dont come cheap.

K.K.N. Bhd has isolated two distinct markets with the following demand:

Businessmen (frequent fliers, subscript B): QB = -1/2 PB + 150

Foreign tourists (subscript F): QF = -5/2 PF + 300

K.K.N. Bhd total costs are given by : TC = Q2 + 10 Q + 10,000

Initially K.K.N. Bhd charged a single common profit-maximizing price on both markets. Compute the common price and this maximum amount of profit. From a figure where the average cost and average revenue curves are drawn what is K.K.N. Bhd situation? Beware, with a common price, K.K.N. Bhd has the possibility to sell only to one market at a price too high for the other market , or to sell at a lower price to both markets, profits from both situations should be compared.

Realizing that the two markets are different and well insulated, K.K.N. Bhd plans to charge different prices on each market. What would be the maximum profit attainable then? Compare this solution to the earlier one for K.K.N. Bhd and for both groups of customers.