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A monopoly sells good Q in two markets. The demands in these two markets are depicted...

A monopoly sells good Q in two markets. The demands in these two markets are depicted by the equations, ? = 10 − ? and ? = 18 − 3? . The goods for both markets are supplied from ##$$ the same factory with the marginal cost, $2.

a. (5 points) What is the profit-maximizing price-quantity combination in each market? What is the total profit? Assume a consumer in one market does not have access to the other market, i.e., (s)he can buy the good only in the market (s)he is in.

b. (8 points) Suppose now that the monopoly cannot price discriminate. What is the profit- maximizing price-quantity combination? What is the total profit? Show your answer on a diagram with proper labels. How many units of the good does the monopoly sell in each market?

c. (7 points) Suppose now, for the combined markets in part (b), the monopoly can perfectly price discriminate. What is the profit-maximizing price-quantity combination? What is the total profit?

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Expert Solution

Rahul Sunny answered 8 months ago
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