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    Profit-maximizing price: Geographically divided markets

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    A monopolist sells in two geographically divided markets, the East and the West. Marginal cost is constant at $50 in both markets. Demand and marginal revenue in each market are as follows:

    QE = 900 - 2Pe
    MRe = 450 - QE
    QW = 700 - PW
    MRw = 700 - 2Qw

    a. Find the profit-maximizing price and quantity in each market.
    b. In which market is demand more elastic?

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    https://brainmass.com/economics/output-and-costs/profit-maximizing-price-geographically-divided-markets-543427

    Solution Preview

    a. Find the profit-maximizing price and quantity in each market.

    Marginal Cost=MC=$50

    Market : East
    MRe=450-QE
    Put MRe=MC
    450-QE=50
    QE=400

    QE=900-2Pe
    Put QE=400
    400=900-2Pe
    2Pe=500
    Pe=250

    Profit Maximizing price in East=$250
    Profit Maximizing ...

    Solution Summary

    Solution depicts the steps to find out the optimal price and output combinations in two different markets.

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