problemset10 - Middle East Technical University Department...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Middle East Technical University Spring 2011 Department of Economics ECON 201 Erol Çakmak TA: Osman Değer PROBLEM SET 10 1)Suppose a monopoly can produce any level of output it wishes at a constant marginal(and average) cost of $5 per unit. Assume the monopoly sells its goods in two different markets separated by some distance. The demand curve in the first market is given by Q1=55-P1 and the demand curve in the second market is given by Q2=70-2P2 a)If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market, and what price will prevail in each market? What are total profits in this situation? b)How would your answer change if it costs demanders only $5 dollars to transport goods between two markets? What would be the monopolist’s new profit level in this situation? c)How would your answer change if transportation costs were zero and then the firm was forced to follow a single price policy? d)Suppose the firm could adopt a linear two part tariff under which marginal prices
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 2

problemset10 - Middle East Technical University Department...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online