A monopolist produces for two, geographically distinct markets. The demand in market A is qA =...

A monopolist produces for two, geographically distinct markets. The demand in market A is qA = 72−3p
and the demand in market B is qB = 40 − 2p. The firm’s total cost function is C(qA + qB) = 5 + 2(qA + qB).
The cost of transporting a good between the two markets is t.
a. Suppose that transportation cost is t = 0. Find the price in each market that maximizes the monopolist’s
profits. What are the corresponding quantities in each market?
b. Suppose instead t = ∞. Find the price in each market that maximizes the monopolist’s profits. What
are the corresponding quantities in each market?
c. Suppose instead t = 1. Find the price in each market that maximizes the monopolist’s profits. What
are the corresponding quantities in each market?

Expert Solution

Rahul Sunny answered 2 years ago

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