1. A firm can price discriminate between two markets. Assume that its TR functions are
Market 1 TR_1 = 25Q_1 - 2Q_1^2
Market 2 TR_2 = 17Q_2 - Q_2^2
and its TC function is TC = 2 + 5Q_1 + 5Q_2
a. Find the firm’s profit function.
b. Find the output levels needed to maximise profit.
Use the second-order derivatives to test for a maximum.
What is the maximum profit?
What price will the firm charge in each market to maximise its profit?