1. The following shows the demands and marginal revenue in two markets (D1 and MR1, and D2 and MR2) for a price
discriminating firm along with total demand, DT, marginal revenue, MRT, and marginal cost MC.
As with the PPT slides, you can view the data generating these lines; for reference,
D1 = 700 - 0.25Q
D2 = 900 - 0.25Q
MRT = 800 - 0.25Q
DT = 800 - 0.125Q
MC = 0.0006Q^2 - 0.8Q + 394
a. Compare the demand conditions in each market; i.e. how do the two markets differ in their demand for the firm's product?
b. How much total output should the firm produce (for both markets combined)? How should that output be allocated between markets 1 and 2?
c. What price should the firm charge in each market?