Suppose that a monopolist sells in two markets with demand curves: QA = 100 10PA QB
Question:
QA = 100 − 10PA
QB = 8 − 2PB
a. Show that for any given quantity, demand is more elastic in market A than in market B.
b. Suppose that the monopolist produces at zero marginal cost. How much does he supply in each market, and what prices does he charge?
c. Suppose that the monopolist’s marginal cost curve is given by:
MC = Q/21
How much does he supply in each market, and what prices does he charge?
d. Reconcile your answers to parts (a), (b), and (c) with the statement in the text that the group with more elastic demand is always charged the lower price.
e. Suppose that the monopolist’s marginal cost curve is given by
MC = Q/3
What will the monopolist do?
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Step by Step Answer:
a From the answer to N1 we see that marginal revenue in markets A and B is given by MR A 100 2Q A 10 ...View the full answer
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