Suppose your business has a monopoly on video games (the question takes place in the mid 80s) in the towns of Berkeley and Palo Alto. You produce video games in your parents' garage at a constant marginal cost of $5 per unit and zero fixed costs. Also assume that you can produce video games in fractional quantities. The demand for video games in Stanford and the demand for video games in Berkeley are QS = 55 PS and QB = 70 2PB [1] If you can ensure that video games sold in Berkeley are not resold in Palo Alto and vice versa, how many video games will you sell in each market? At what price will you sell the games in each market? What will your total profit be in each market?

[2] If you are forced to charge the same price in Berkeley and Palo Alto, what will be the total demand for video games in Stanford and Berkeley, Q = QS + QB? What will be the total quantity sold and the quantities sold in each market? And what will be the price, and your company's profit?