Question 1

1. The following shows the demands and marginal revenue in two markets (DI and MR1, and D2 and MR2) for a price discriminating firm along with total demand, DT, marginal revenue, MRT, and marginal cost MC. 700 D1 650 MR1 600 550 02 DT MRT 500 ...................................5 MR2 450 .. . ... 400 ......... 350 300 250 200 MC 150 100 50 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 . . D1 - - - MR1 - . - D2 - MR2 ......... MRT - DT - MC As with the PPT slides, you can view the data generating these lines; for reference, D1 = 700 - 0.2Q D2 = 540 - 0.2Q MRT = 620 - 0.2Q DT = 620 - 0.1Q MC = 0.0006Q 2 - 0.55Q + 279 a. Compare the demand conditions in each market; i.e. how do the two markets differ in their demand for the firm's product? b. How much total output should the firm produce (for both markets combined)? How should that output be allocated between markets 1 and 2? C. What price should the firm charge in each market