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Constant marginal cost

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A monopoly can sell its product in two different cities, A and B. The monopolist believes that the two cities are far enough from each other that resale is impossible, so it decides to price-discriminate.

1. What would be the profit-maximizing price and quantity in each city if the monopolist has a constant marginal cost of $10 and the inverse demand curves in the two cities are given by:PA = 70 - QA PB = 60 - QB

2. Based on the prices you calculated for each city; can you infer which city has the more elastic demand?

3. Without doing any calculations, can you tell what would happen to the monopolist's profit if it were to charge the same price in both cities? Why?

Reference no: EM133067562

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