Scenario 3: Suppose that a large firm is operating in two markets, the domestic market, and the foreign market. The inverse demand function in the domestic market is given by PD = 144 - 2QD, and the inverse demand function in the foreign market is given by PF = 100 - 2QF. Marginal cost is given by

MC = 56 + 1.3Q. Assume zero fixed costs. Note: consumers cannot consume negative quantities.

1) Refer to Scenario 3. If the firm charges a single price in both markets, then P= $______; and total Q = ______.

2) Refer to Scenario 3. If the firm charges a single price ..., then total CS = $______; and total profits = $______.

3) Refer to Scenario 3. If the marginal cost of the firm becomes MC = 1.3Q, and if the firm is charging a single price in both markets, then P = $______; QD = ______; and QF = ______.

4) Refer to Scenario 3. Given the new MC, if the firm charges a single price, then CSD = $______; CSF = $______; and total profits = $______.

5) Refer to Scenario 3. Given the new MC, if the firm practices price discrimination, then PD = $______; QD = ______; and CSD = $______.

6) Refer to Scenario 3. Given the new MC, if the firm practices price discrimination, then PF = $______; QF = ______; and CSF = $______.

7) Refer to Scenario 3. Given the new MC, if the firm practices price discrimination, thenD = $______; andF = $______.

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