Suppose a monopoly can produce any level of output it wishes at a constant marginal (and...

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Suppose a monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per unit. Assume the monopoly sells its goods in two different markets separated by some distance. The demand curve in the first market is given by Q₁ = 55-P. and the demand curve in the second market is given by Q₂-70-2P₂. a. If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this situation? b. How would your answer change if it costs demanders only $4 to transport goods between the two markets? What would be the monopolist's new profit level in this[ situation? c. How would your answer change if transportation costs were zero and then the firm was forced to follow a single-price policy? d. Now assume the two different markets 1 and 2 are just two individual consumers, Suppose the firm could adopt a linear two-part tariff under which marginal prices charged to the two consumers must be equal but their lump-sum entry fees might vary. What pricing policy should the firm follow? Suppose a monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per unit. Assume the monopoly sells its goods in two different markets separated by some distance. The demand curve in the first market is given by Q₁ = 55-P. and the demand curve in the second market is given by Q₂-70-2P₂. a. If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this situation? b. How would your answer change if it costs demanders only $4 to transport goods between the two markets? What would be the monopolist's new profit level in this[ situation? c. How would your answer change if transportation costs were zero and then the firm was forced to follow a single-price policy? d. Now assume the two different markets 1 and 2 are just two individual consumers, Suppose the firm could adopt a linear two-part tariff under which marginal prices charged to the two consumers must be equal but their lump-sum entry fees might vary. What pricing policy should the firm follow?

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a ANSWER The monopoly should produce 10 units in the first market and 30 units in the second market The price will be 50 in the first market and 60 in ... View the full answer