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International price discrimination

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Reference no: EM132336401

Question

Suppose demand for Microsoft software in the US is: P = 200-Qus, and marginal revenue is MR = 200-2Qus where quantity is measured in millions. Demand for software in Canada is P = 100-2Qca and marginal revenue is MR=100-4Qca. The marginal and average cost of production for Microsoft is $50.

How much profit will Microsoft make if it charges different prices in the US and Canada?

And Suppose it charges a uniform price of $100 in the two markets. Show that this strategy is inferior to international price discrimination.

Reference no: EM132336401

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