Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ONLY LEGIT ANSWERS NO PLAGIRISM. Solution preferred written on paper. I will report if answer is incorrect or plagiarised. Question 3: Monopoly pricing [7 marks;
ONLY LEGIT ANSWERS NO PLAGIRISM. Solution preferred written on paper. I will report if answer is incorrect or plagiarised.
Question 3: Monopoly pricing [7 marks; 3,2,2] Consider a monopolist which faces the following demand curves for its product in the export market A and the domestic market B. Inverse demand curve in the export market: QA = 360 2pA Inverse demand curve in the domestic market: 03 = 200 [3.3 where pi and Qi denote price and quantity sold in market i where i = A, B. The monopolist's cost function is given b: C(Q) = 0.25Q2 where Q = QA + QB. Assume that resale between the two markets is not possible and the monopolist maximizes prots. (a) (3 marks) Find pet and [33 that maximizes monopolist's prots. (b) (2 marks) Suppose home government in country B imposes a restriction that the monopolist cannot sell more in the export market. That is: QASQB must hold. However, the monopolist can charge two different prices in countries A and B. Find the amount of output that monopolist sells in each country and the resulting price levels (which will be different for A and B) that maximizes the monopolist's joint profits (i.e., the sum of profits in the two countries). (c) (2 marks) Suppose that the WTO prohibits price discrimination. That is, the monopolist cannot charge two different prices in A and B. Find the unique price that maximizes the monopolist's joint profits (i.e., the sum of prots in the two markets)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