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In Australia, the demand curve for the economics textbook titled Economics for Down-under Students published by Emu University Press is described by the following equation

In Australia, the demand curve for the economics textbook titled "Economics for Down-under Students" published by Emu University Press is described by the following equation

q1 = 120 p1

if p1 is not greater than 120 (and q1 = 0 if p1 > 120), where p1 is the price in the Australian market (measured in Australian dollars) and q1 is the quantity demanded by Australian residents. Emu University Press wants to sell the same textbook in New Zealand. The demand curve for this book in the New Zealand market is

q2 = 100 p2

if p2 is not greater than 100 (and q2 = 0 if p2 > 100), where p2 is the price in the New Zealand market (also measured in Australian dollars) and q2 is the quantity demanded by New Zealand residents. Emu University Press's marginal cost of printing a book is 40 Australian dollars (independent of where it is printed). There are no fixed costs.

(i)Suppose that Emu University Press wants to set different prices in different markets and suppose that no one is allowed to ship books from one market to the other. Find the monopoly profit maximizing prices p m 1 and p m 2. Compute Emu University Press's profit in market 1 (Australia) and market 2 (New Zealand), and find the consumer surplus in each market.

(ii)Now, suppose that the governments of the two countries get together and pass a law that bans price discrimination on textbooks. Emu University Press must therefore set the same price, say p , in both markets. Given that the marginal cost of printing a book is 40, find the value of p that maximizes the sum of the profits that Emu University Press make on the textbook. Compute the consumer surplus in each market under the uniform price p .

(iii)Compute p if the marginal cost is 81 instead of 40.

(iv)Compute p if the marginal cost is 89 instead of 40.

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