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Suppose that a monopoly has a constant marginal cost (MC=$5) per unit of output produced. that monopolist sells its goods in two different markets that are separated by some distance. the demand curve in the first market is given by Q1=55-P1 ( and MR1=55-2Q1) and for the second market by Q2=70-2P2 ( and MR2=35-Q2)
a. suppose that it costs demanders only $5 to transport goods between prices and quantities in the two markets. How would your answer be for equilibrium prices and quantities in the two markets? what would be the monopolists total profits in this situation?
b. suppose transportation costs were zero and the monopolist was forced to follow a single-price policy. what would be the equilibrium prices and quantities now? what would be the monopolist's profits?
the market system3939s answer to the fundamental question quotwho will get the goods and services?quot is essentially 1
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