Suppose that there is a firm that sells the same good in two different markets andis able to prevent resale from the lower priced market to the higher priced market. The direct demand functions for the two markets are given by the following two equations:

Q1 = 8- P1Q2= 12- P2

Also, the firm produces this good in one plant, so the Total Cost function is given by the following equation:

TC = 5 + 6(Q1+Q2)where Q1+Q2 is total Quantity

a.Calculate the profit maximizing quantity and price in market 1. Calculate the own price elasticity of demand for market 1 at this quantity and price.

b.Calculate the profit maximizing quantity and price in market 1. Calculate the own price elasticity of demand for market 1 at this quantity and price.

c.Do the sizes of the relative elasticities of demand make se

nse given the relative prices in the two markets?

d.Given an example of a price setting firm that sells the same good in two different markets for different prices.