Suppose a textbook monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by

Q1 = 55 – P1

and the curve in the second market is given by

Q2 = 70 – 2P2

a. If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what price will prevail in each market? What are total profits in this situation?

b. How would your answer change if it only cost demanders $5 to mail books between the two markets? What would be the monopolist’s new profit level in this situation? How would your answer change if mailing costs were 0?