Q6.1

Banana Computer Company sells Banana Computers both in the domestic and foreign markets. Because of the differences in the power supplies, a Banana computer purchased in one market cannot be used in the other market. This means that the company can use third-degree price discrimination to maximize profits. Let's suppose that it costs $1,000 to produce each computer (this is marginal and average cost). Let's suppose further that the domestic and foreign demand curves are given as follows (the subscript "F" denotes "foreign," whereas the subscript "D" is used to denote "domestic"):

PD13,00020QD

PF=17,00040QF

Q6.1 a) What domestic prices maximize profits for this firm?

Q6.1 a) What foreign prices maximize profits for this firm?

Q6.1 a) How many computers do they sell in the domestic market?

Q6.1 a) How many computers do they sell in the foreign market?

Q6.1 a) How much profit does the company earn?