Question: A monopolist is deciding how to allocate output between two geographically separated markets (East Coast and Midwest). Demand and marginal revenue for the two markets
P1 15 Q1…………………MR1 15 2Q1
P2 25 2Q2………………..MR2 25 4Q2
The monopolist’s total cost is C 5 3(Q1 Q2). What are price, output, profits, marginal revenues, and deadweight loss (i) if the monopolist can price discriminate? (ii) if the law prohibits charging different prices in the two regions?
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i Choose quantity in each market such that marginal revenue is equal to marginal cost The marginal cost is equal to 3 the slope of the total cost curv... View full answer
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