In 2010 Apple introduced the first iPad. While it was not the first tablet computer in the

market, it was certainly the most elegant, easiest-to-use one. Apple's overall demand curve for its iPad at that time can be described as Q = 70 P/11, where P is the price (in dollars) that Apple charged per iPad, and Q is the number of iPads demanded in millions per year.

However, Apple marketers realized that that their demand really came from two places: the US and Europe. (Yes, in reality Apple sold iPads all over the world. We're simplifying here.) Demand for iPads from the US can be described as Q = 40 P/22. Demand for iPads from Europe can be described as Q = 30P/22. (In both cases Q is measured in millions of iPads per year, and P is in dollars per iPad (ignore any exchange rate worries).)

At the time, company analysts estimated that Apple's marginal cost of producing, distributing, and selling each iPad in the US was $220. The cost of doing so in Europe is actually $264, due to higher labor and distribution costs there. In addition, its fixed cost involved in iPad production globally were $2000 million (i.e., $2 billion, or, $2,000,000,000) per year.

You can assume that Apple is able to set and maintain different prices between the US and Europe.

(a) (6 pts) Answer the following, showing your work:

What price should Apple charge for an iPad in the US?

What quantity will they sell in the US?

What price should they charge in Europe?

What quantity will they sell in Europe?

What will their overall profits be?

(b) (4 pts) An operations analyst at Apple notices that the profit margins made on iPads sold in the US are different from the margins made on iPads sold in Europe. In a meeting this person suggests, "we could increase profits by selling more iPads in the high-profit-margin area and selling fewer iPads in the low-profit-margin area. Why don't we do that?"

Do you agree? Please indicate if you agree or not and why.