Question
I tried to solve the following question and I'm doing something painfully wrong... what am I missing that it's this far off? Question #4 (3
I tried to solve the following question and I'm doing something painfully wrong... what am I missing that it's this far off?
Question #4
(3rd Degree Price Discrimination)
A Monopolist sells beer in two separate markets.They must decide how much to sell in each market in order to maximize their total profits.
The demand in the Canadian Market is :QCanada = 1120 - 10PCanada
The demand in the United States Market is:QUSA = 660 - 20PUSA
MC = MR
If Total Cost is:TC = 10 + 5(QUSA +QCanada)
A.Calculate the Price and Quantity if the Monopolist Maximized their profit and sells in both markets?(8 Points)
a.Canada
i.QCanada = 1120 - 10PCanada
1.10P = 1120-Qcanada
2.P=112 - 0.1Qcanada
ii.TR= (112-0.1Q)Q
1.TR=112Q-0.1Q2
2.MR=112-0.2Q
iii.Marginal cost = 5
1.112-.2Q=5
2.107=.2Q
3.535=Quantity for Canada
iv.P=112-0.1(535)=58.50 Price for Canada
b.USA
i.Q=660-20P
1.20P=660-Q
2.P=33-0.05Q
ii.TR=(22-0.05Q)Q
1.TR=22Q-0.05Q2
2.MR=22-0.1Q
iii.Marginal cost = 5
1.22-0.1Q=5
2.17=0.1Q
3.170=Quantity for USA
iv.P=33-0.05Q
1.33-0.05(170)=33-8.5=24.5 Price for USA
B.Calculate the Profit if he Monopolist Maximized their profit and sells in both markets?(6 Points)
a.TR=(Pusa*Qusa)+(Pcanada*Qcanada)
i.(170*24.5)+(535*58.50)
ii.4165+31297.50=35,462.50
b.TC= 10 + 5(170 +535)
i.10+850+2675=3,535
c.TR-TC=31,927.50 Profit
C.In the absence of 3rd Degree Price Discrimination and the firm must sell at the same price in both markets, what is the price, quantity and total profit?(6 Points)
a.Qt=1120 - 10P+660 - 20P
i.Q=1780-30P
ii.30P=1780-Q
iii.P=59.33-0.03Q
b.TR=(59.33-0.03Q)Q
i.MR=59.33-0.06Q
c.MR=MC
i.59.33-0.06Q=5
ii.54.33=0.06Q
iii.905.5 is total Quantity -can't be right.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started