Suppose a textbook monopoly can produce any level of output it wishes at a constant MC and AC of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by: Q1=55-P1 and the demand curve in the second market is given by: Q2=70-2P2

(1) This problem is easier to solve if you work out the following premiminary result. show that for a downward-sloping linear demand curve, profits are maximized when output is set at Q*/2, where Q* is the output level that would be demanded when P=MC.

(2) If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what price will prevail in each market? What are total profits in this situation?

(3) How would your answer change it it only cost demanders $5 to mail books between the two markets? What would be the monopolist's new profit level in this situation? How would your answer change if mailing costs were $0?