(Scenario: Discriminating Monopolist) The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. Its marginal revenue in the home market is MR =200 - 2Q and is MR = 160 - 4Q in the foreign market.
What is the discriminating monopolist's profit per unit in the foreign market?

Question

Quizplus · Accepted Answer

To find the profit per unit in the foreign market, we first determine the quantity where marginal revenue equals marginal cost in the foreign market. Setting MR equal to MC gives us 160 - 4Q = 20. Solving for Q gives us Q = 35. To find the price, we substitute Q back into the demand equation for the foreign market: P = 160 - 2(35) = 160 - 70 = 90. The profit per unit is then the price minus the marginal cost: 90 - 20 = $70.

(Scenario: Discriminating Monopolist) the Demand Curve in Its Home Market