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A monopolist produces a single homogeneous good, which he sells in two markets between which discrimination is possible. His total cost function is:

TC = Q3 /3 - 40Q2 + 1800Q + 5000

where annual total cost is in dollars and annual output in tons. The demand curves in the two markets are given by the equations

q1 = 320 - 0.4 p1 and

p2 = A - Bq2

The monopolist achieves a profit-maximizing equilibrium at which his total output (Q = q1 + q2) is 60 tons per annum and his annual pure profit is $5,000.

(a) What is the marginal cost at the profit maximizing output?

(b) What are the values of q1 and p1 at this output?

(c) What are the values for total cost and total revenue at this output?

(d) What are the individual values for total revenue in each of the markets?

(e) Having find outd all of the above, it is now easy to find out the values for A and B in equation p2 .

What are these values?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M937555

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