Explore BrainMass
Share

Firm A has no costs of production and sells its production i

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Firm A has no costs of production and sells its production in two buyers. Buyer 1's demand function is
p1 = 90 - 10y1
and Buyer 2's demand function is
p2 = 60 - 5y2
Assuming that the firm can engage in ordinary price discrimination, find the profit maximizing prices.

What is firm A's profit?
Now suppose that the firm cannot price-discriminate.
First find the firms aggregate demand function.
Then find its marginal revenue function.
Find its profit maximizing price, and compute its profit

© BrainMass Inc. brainmass.com October 9, 2019, 8:36 pm ad1c9bdddf
https://brainmass.com/economics/production/firm-a-has-no-costs-of-production-and-sells-its-production-i-156604

Solution Preview

p1 = 90 - 10y1

Total Profit = 90y1 - 10y1^2

dprofit / dy1 = 90 - 20y1

y1 = 4.5 (substituting dprofit /dy1 = 0 for profit maximization)

total profit from p1 = 90x4.5 - 10 (4.5)^2 = ...

\$2.19