Firm sells diving masks to two market segments

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A firm sells diving masks to two market segments. Segment A has a demand curve given by P = 80 – 2 QA, while Segment B has a demand curve given by P = 60 – (1/2) QB. The firm has fixed costs of $300 and a constant marginal cost (MC) of $16. Calculate the profit-maximizing price and quantity for each segment assuming no capacity constraint. Show work. Calculate the firm’s profits at the profit-maximizing prices and quantities for the two segments. Show work. Calculate the point price elasticities of demand for the two segments at their profit-maximizing prices and quantities from part a. Show work. Verify that the segment with the higher elasticity ends up paying the lower price. Suppose the firm must sell to both segments at the same price. Now, calculate the profit-maximizing price and quantity for each segment assuming no capacity constraint. Show work. Calculate the firm’s profits in this case. Show work.

Reference no: EM131092866

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