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A food company A produce one type of frozen fruits sold directly to consumers and ice-cream shops, and firm A has a marginal cost of $2. Firm A charges the two groups of consumers differently based on the following demand functions:
P1=5-2Q1
P2=10-Q2
Use the given information to answer the following questions:
-For the two market segments, which group is more responsive to price? (Hint: you may consider using own price elasticity of demand)
2. Find the optimal prices for company A in each of the market segment.
(Hint: you need to consider the profit maximisation condition)
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1. What are the perfect market assumptions? 2. Explain whether the following statements are true or false. In each case, provide justi?cation for your answer:
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