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

Suppose a textbook monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by Q_1=55- P_1 and the curve in the second market is given by Q_2=70-2P_2 Remember sometimes is easier to work with inverse demand functions. First assume that the monopolist can charge only one price. Obtain the P and the Q and economic profit for a monopolist. 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?

Expert Solution

When the monopolist can charge only one price then:

Q=Q1+Q2

Total profits=675+450=1125

Rahul Sunny answered 2 years ago

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

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