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In: Economics

Universal widget produces high-quality widgets. Its total cost function is given by ?? = 0.25? 2...

Universal widget produces high-quality widgets. Its total cost function is given by ?? = 0.25? 2 . Widgets are demanded in Australia (where the demand curve is given by qA = 100 – 2PA) and in Lapland (where the demand is given by qL = 100 – 4PL). Total demand is equal to the combined demand from both locations. Suppose Universal widget can control the quantities supplied to each market.

(a) How many should it sell in each location to maximize its profit?

(b) What price will be charge in each location?

Expert Solution

Given, Total Cost

Demand in Australia,

Demand in Lapland,

As it is menationed the firm can control quanitties supplied to each market and it will be selling at different price in the two markets. Therefore, the firm will maximize profit at MR = MC

Determine the MC by differentiating the TC we get

The Austrailian market has a demand of

or,

Differentiate TR wrt q we get

Now equate it to MC we get

Pa = 33.33

Now calculating for Lapland

A. Quanity Australia = 33.33 units

Quantity Lapland = 25 units

B. Price Australia = $ 33.33 per unit

Price Lapland = $ 18.75 per unit

Rahul Sunny answered 7 months ago

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