Say a monopolist sells in two separate markets, with demand PA = 100 - 2Q and PB = 50 - Q respectively. Marginal costs in both markets are constant and equal to 8. The monopolist would charge a price of _______ in market B in order to maximize profits.
A)29
B)21
C)8
D)0

Question

Quizplus · Accepted Answer

To maximize profits, the monopolist will equate marginal revenue (MR) to marginal cost (MC) in each market. For market B, the demand equation is PB = 50 - Q. The marginal revenue in market B can be derived from the demand function, which is MRB = 50 - 2Q (since the slope of the MR curve is twice the slope of the demand curve). Setting MR equal to MC to find the quantity that maximizes profit: 50 - 2Q = 8, solving for Q gives Q = 21. Substituting Q = 21 back into the demand equation for market B to find the price: PB = 50 - 21 = 29.

Say a Monopolist Sells in Two Separate Markets, with Demand