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HW-835 Monopoly price discrimination
A monopolist can sell in two markets. In the U.S.A. it faces demand given by:
QUS = 5500 –100PUS, while in Europe it faces demand given by QEU = 18000 – 400PEU.
a) What is the practice of charging different prices in different markets called?
Why is it often not possible to price discriminate between markets?
b) The firm has fixed costs of $20,000 even if it produces nothing, and it has marginal costs of $15 for each unit it produces. Find the profit maximizing price and quantity sold in each market. What is the firm’s profit?
c) Now the firm has access to a new technology with no fixed costs but slightly increasing marginal cost: MC = 0.075Q. Find the profit maximizing price and quantity sold in each market. How much will the firm produce with each technology. What is the firm’s profit?
Answer will be sent by email as attachment.
QUS = 5500 –100PUS, while in Europe it faces demand given by QEU = 18000 – 400PEU.
a) What is the practice of charging different prices in different markets called?
Why is it often not possible to price discriminate between markets?
b) The firm has fixed costs of $20,000 even if it produces nothing, and it has marginal costs of $15 for each unit it produces. Find the profit maximizing price and quantity sold in each market. What is the firm’s profit?
c) Now the firm has access to a new technology with no fixed costs but slightly increasing marginal cost: MC = 0.075Q. Find the profit maximizing price and quantity sold in each market. How much will the firm produce with each technology. What is the firm’s profit?
Answer will be sent by email as attachment.
