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    the firm's profit

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    A monopolist can sell in two markets defined by: QA = 5500- lOOPA and QB = 18000 - 400PB
    a) If the monopolist charges different prices in each market, what is this practice called?

    b) It costs the firm $20,000 even if it produces nothing, and $15 for every unit above that. FInd the price and quantity sold in each market. WHat is the firm profit?

    c) Now the firn has access a new technology with no fixed costs but increasing marginal cost MC = .1Q. find the price and quantity sold in each market. How much will the firm produce with each technology? what is the firm's profit?

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    Solution Preview

    The two demand curves are:

    QA = 5500 - 100PA
    or PA = 55 - (1/100)QA

    QB = 18000 - 400PB
    or PB = 45 - (1/400)QB

    (a) If the firm charges different prices in each market the practice is called price discrimination. More precisely it is third-degree price discrimination since the firm can separate the two markets.

    (b) The fixed costs are given to be $20000. The variable cost is given to be $15 per unit. Therefore, total cost to produce quantity Q is given by

    TC = FC + VC = 20000 + 15Q

    Marginal cost is the change in total cost with a unit change in quantity. The change in total cost for each unit change in Q is 15. Therefore,

    MC = 15.

    The marginal revenue curve in market A is given as

    MRA ...

    Solution Summary

    The firm's profit is uncovered. Monopoly and market power for a firm's profit is examined.