1. Consider a monopoly that sells its output in two completely separated markets. Marginal cost is constant at $35 per unit. Inverse demand in the two markets is given by
P1 = 100 - 2Q1
P2 = 300 - 2Q2
a. Solve this problem via analytical methods. Report optimal quantity and price in each market. Use Word's Equation Editor as needed.
b. Solve this problem with the TwoPriceDisc sheet. Enter the appropriate coef- ficients on the sheet. Take a picture of the results and paste it in your Word doc.
c. Which market has a higher price?
d. How does the price elasticity of demand in each market affect the price?
e. Which market has greater deadweight loss? How do you know?
f. How does the price elasticity of demand affect the deadweight loss?
g. The overall market demand is given by P = 200 - Q. Enter the overall mar- ket demand coefficients in the Monopoly sheet and run Solver to find the optimal solution. How does price discrimination affect welfare loss?