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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?

Top Answer

2nd market has higher demand compared to... View the full answer

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