Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 and a fixed cost of $10billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United States. The demand for BMWs in each market is given by

QE=4,000,000100PE

and

QU=1,400,00020PU

where the subscript E denotesEurope, the subscript U denotes the United States. Assume that BMW can restrict U.S. sales to authorized BMW dealers only.

a.What quantity of BMWs should the firm sell in eachmarket, and what should the price be in eachmarket? What should the total profitbe? (round dollar amounts to the nearest penny and quantities to the nearestinteger)

InEurope, the equilibrium quantity is

nothing

cars at an equilibrium price of $

nothing

.

While in the UnitedStates, the equilibrium quantity is

nothing

cars at an equilibrium price of $

nothing

.

BMW makes a total profit of $

nothing

.