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A monopolist sells the same product at the same price into two di?erent markets. The demand for the product in market #1 is denoted D1(p) = 70-10p where p is the unit price. The demand for the product in market #2 is given by D2(p) = 80-5p. Total demand at any unit price p is the sum of demands from each market.
1. If the monopolist sets a price of $5 per unit, what will total demand be?
2. If the monopolist sets a price of $10 per unit, what will total demand be?
3. What is the elasticity of total demand at a price of $5 per unit?
4. What is the elasticity of total demand at a price of $10 per unit?
5. Assume the monopolist's cost function is C(q) = 2q. What is the monopolist's pro?t maximizing price?
6. Now assume the monopolist enjoys zero production costs. What is the monopolists's pro?t maximizing price?
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