Question
Suppose a market can be separated into two distinct market segments, where: P1 = 42 4Q1 P2 =22 2Q2 TC = 5 + 10(Q1 +
Suppose a market can be separated into two distinct market segments, where: P1 = 42 4Q1 P2 =22 2Q2 TC = 5 + 10(Q1 + Q2)
a. What is the firm's overall or market demand curve - graph this on graph paper.
b. What is the firm's marginal cost and marginal revenue? For the marginal cost, it might help to make a cost table and examine how TC changes if Q1 or Q2 is increased. Put the MC curve in your answer in (a).
c. Graph the two market segments' demand curve, MR, and MC, in two separate graphs, as shown in class.
d. What is the profit maximizing level of output and the price per unit in each segment of the market?
e. Calculate the price elasticity of demand at these profit maximizing prices. Comment on your answers
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