1. Sandra sells shoes in county region. Her shoes are winter shoes which have a special material for keeping cold out and are water resistant. She has a patent on her production and hence no other manufacturer of shoes is able to make winter shoes like hers. She decides to expand her business to the neighbouring Yellowknife region and hence now sells in 2 markets. The inverse demand function in county region is pc= 400 - qc. In Yellowknife, the demand curve is pk = 200 - qk. Sandras total cost function is = C (qc + qk) = (qc + qk)². Sandra is well acquainted with her business in both regions and is able to price discriminate.

• What is the equation for Sandra's shoe total profits as a function of qc and qk
• What is her marginal revenue in county region?
• What is the marginal revenue in Yellowknife?
• What is Sandras marginal cost?
• Using Sandras profit maximising conditions, find her optimal choices of qc, qk, pc, pk
• What if consumers can easily travel to both regions and hence can access both markets easily. Thus, Sandra is no longer able to price discriminate and is forced to change her pricing tactic to uniform pricing (she must charge the same price in both regions). What is Sandra's new choice of price and total output? How much of the total output is sold to the consumers in Yellowknife? What about in county region? Is she better off price discriminating or with uniform pricing?