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Unformatted text preview: P 1 = 20-Q 1 and in the other P 2 = 15- (3/2)Q 2 and its total cost: C=6Q where Q = Q 1 + Q 2 . What quantities will it sell in each market and what prices will it charge in the two markets? (10 Marks). 6. A profit maximizing chain of video stores holds an exclusive license to rent out the movie " Steamy Nights in North Bay", of which it holds multiple copies. It discovers that the demand curve for daily rentals in North Bay is different from the demand curve in Hamilton. Specifically, the demand functions it faces are P 1 =500-Q 1 P 2 =700-Q 2 Where P 1 and P 2 denote the prices per rental, Q 1 and Q 2 are the numbers of rentals, and subscript 1 refers to North Bay and subscript 2 to Hamilton. The stores total costs are C=1000 + 0.5Q 2 a. Find P 1 , Q 1 , P 2 and Q 2 (8 Marks) b. Calculate total profits (2 Marks) c. Show that a higher price is charged in the market where demand is less elastic (5 Marks)...
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This note was uploaded on 06/18/2011 for the course ECON 2X03 taught by Professor Jamesbruce during the Spring '10 term at McMaster University.
- Spring '10