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Math Help - Monopoly Questions

  1. #1
    Junior Member
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    Monopoly Questions

    A monopoly sells in 2 separate markets. The demand functions are  Q_1=100-P_1and Q_2=140-2P_2 with a constant variable cost of $10.

    1. Suppose the monopoly were forced to charge 1 single price. What is the optimal price?
    2. Suppose the monopoly can perfectly discriminate in both markets, calculate the profit for both market.

    1. Should i combine both demand functions into one? So Q=240-3P?
    2. For each market, should i set price = mc? so 100-Q_1=10 and  70-Q_2/2=10 ?

    Thanks in advance
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  2. #2
    Newbie
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    Apr 2010
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    Be careful how you combine the demand functions in the first question. Q_2=140-2P_2 only when P<70 , otherwise Q_2=0 . Therefore, your combined demand function is only valid for P<70 .

    Remember you don't want to set price equal to marginal cost, you want to set marginal revenue equal to marginal cost.
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