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Consider the following monopoly operating in two different markets that are very distant from one another. The marginal cost for producing this good is MC1 = 5. MC2 = 5; the two demand functions are Q1= 55 - P1; Q2= 70 - 2P2; The marginal revenues are
MR1 = 55 - 2*Q1 and MR2 = 35 - Q2
a. Find the price-quantity combination in each market if this monopoly decides to do a perfect price discrimination (assume that no one can transport the good from one market to another for resale.) hint: maximize profit for the firm in each market. MR = MC.
b. Calculate each company's profit and the total profit.
c. Now consider the same market. However, people have found a way to transport things between the two places for resale and this transportation cost is 5 dollars per unit. What will be the move for the monopolist?
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