Question: The cost function for a monopoly is given by C = Q 2 + 10Q. The firm sells its output in two distinct markets with

The cost function for a monopoly is given by C = Q 2

+ 10Q. The firm sells its output in two distinct markets with (inverse) demand functions given by:

= 80

– 2.5Q1 P2

= 180

– 10Q2

(a) Assuming that price discrimination between the two markets is possible, determine the profit maximizing amounts sold in each market and, hence, the firm’s total output.

(b) Determine the price charged by the monopoly in each market and calculate the total profits of the firm.

(c) Now suppose that price discrimination between the two markets is prohibited. Assuming that the firm charges the same price in each market, determine the profit maximizing amounts sold in each market.

(d) Determine the firm’s total profits in this case.

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