1. Suppose a firm sells a good in 2 markets, each market is characterized by their own respective demand curve.
The demand curve for market 1 : Qd1 = 200 - .1P1
The demand curve for market 2: Qd2 = 300 - .1P2
The good is produced in a single production facility and has the following Total Cost Function:
TC = 100 + 200Qt where Qt = Qd1 + Qd2
a. Calculate the profit maximizing outputs and prices in each market assuming the firm can price discriminate.
b. Calculate the own price elasticities of demand in each market. Are the elasticities elastic or inelastic?
c. Calculate Profits for this price discriminating monopolist at the profit maximizing quantities.
Now, suppose the same monopolist can no longer price discriminate.
d. Calculate the profit maximizing price and quantity. Calculate profits at the profit maximizing Quantity. Are profits higher or lower relative to the price discrimination case?