(Answered) Banana computer company sells banana computers both in the

Management Studies

Banana Computer Company sells Banana Computers both in the domestic and foreign markets. Because of the differences in the power supplies, a Banana computer purchased in the market cannot be used in the other market. This means that the company can use third degree price discrimination in order to maximize profits. Let's suppose that it costs $1,000 to produce each computer (this is marginal and average cost). Let's suppose further that the domestic and foreign demand curves are given as follows (the subscript "F" denotes "Foreign" while the subscript "D" is used to denote "Domestic").

Pd=13,000-20Qd (d are the subscripts)

Pf=17,000-4Qf (f are the subscripts)

a) What prices maximize profits for this firm?

b) How many computers do they sell in each market?

c) How much profit does the company earn?

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