A Monopolist must decide how to price in two markets and allocate product output between them. The markets are separated geographically (being either side of a national border). Demands in the two markets are as follows:
Q1= 30-2P1 and Q2= 24-P2
The monopolists total cost are C=5+(2Q1+Q2)
What ar the prices charged, total product shipped to each market, and the total profits to the monopolist under the following two conditions?
a) Markets are separated, no arbitrage is possible (the firm can ship to both markets, but there is no other trade in the particular product)?
b) Border is opened to free trade and possible arbitrage