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A monopolist
sells in two geographically divided markets, the East and the West. Marginal
cost is
constant at $50 in
both markets.
Demand and marginal
revenue in each market are as follows:
Qe = 1200 – 2Pe
MRe = 600 – Qe
Qw = 800 – Pw
MRw = 800 – 2Qw
Where e represents
the east, and w represents the west market.
a. Find the profit-
maximizing price and quantity in each market.
b. In which market
is demand more elastic? How can you tell? Describe.
c. Under what
conditions, price discrimination is effective and why?
