Question
Q2A monopoly beer producer sells beer to two markets, and the demand for beer in each market is given by Market A:Qa = 40 -2pa
Q2A monopoly beer producer sells beer to two markets, and the demand for beer in each market is given by
Market A:Qa = 40 -2pa
Market B: Qb= 90-3pb
where O is the total number of beer. A bottle of beer can be produced at a constant marginal cost of$14. a . If the beer producer can charge different prices to each market through price discrimination, what price and quantity will it set in each market? Compare the demand elasticities of each market at the equilibrium. What is the total profit from both markets? b If the beer producer cannot price discriminate, what price and quantity will it sell to each market? Is the profit higher or lower than the profit under price discrimination? c Suppose there is a middleman who can buy beer in a cheap market and resell it in an expensive market with a transportation cost of $3 per unit. If price discrimination is still possible, what are the prices charged by the monopoly in each market? What is the total profit of the monopoly?
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