Gliberace's Fashion Accessories of Las Vegas produces gemstone-encrusted formal wear for sale in Los Angeles and San Francisco subject to total cost TC = 100 + 5(Q_LA + Q_SF).Demand for Gliberace's stones in the two cities is given by Q_LA = 70 - 2P_LA and Q_SF = 55 - P_SF.If Gliberace price discriminates between the two cities,how many stones will it sell in Los Angeles?

Question

Quizplus · Accepted Answer

To find the quantity sold in Los Angeles, set marginal revenue equal to marginal cost. The demand function for LA is Q_LA = 70 - 2P_LA. Solving for P_LA gives P_LA = 35 - 0.5Q_LA. The marginal revenue is MR_LA = 35 - Q_LA. Setting MR_LA = MC (which is 5), we get 35 - Q_LA = 5, solving gives Q_LA = 30.

Gliberace's Fashion Accessories of Las Vegas Produces Gemstone-Encrusted Formal Wear