Question
Mirror books are exclusive operators in the advertising market through social media and are facing the demand function q(E) = 12-p(E) in Europe (E) and
Mirror books are exclusive operators in the advertising market through social media and are facing the demand function q(E) = 12-p(E) in Europe (E) and the demand function q(N) = 20-p(N) in North America (N). The production cost function is C(q)=1/2q^, and q=q(E)+q(N).
Consider the case where mirror books take a single pricing strategy(uniform pricing). In other words, mirror books charge Europe and North America the same price p. The mirror book is about Europe and North America.
Only the entire market considered is interested. The total market demand is q=q(E)+q(N).
1. Find e(U)+n(U) when European consumer surplus is called e(U) and North American consumer surplus is called n(U).
2. Suppose there is an integrated government of Europe and North America. Find the market price that the integrated government should set to maximize social welfare.
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