Question

Question 37 1 pts Market 1 Market 2 $350 $900 $800 $300 $700 $250 $600 $200 $500 $150 $100 $400 $300 $200 $100 $0 0 1 2 3 4 9 10 11 12 13 0 1 2 3 7 8 9 10 5 6 7 8 Q (Market 1) 4 5 6 Q (Market 2) The graph above shows the demand functions for a product sold by a monopolist in two different markets. The monopolist faces a constant marginal cost of MC = $200 per unit of production and no fixed cost. If this monopolist could price discriminate, its combined economic profit from the two markets would equal: O A. Combined economic profit = $600 B. Combined economic profit = $800 C. Combined economic profit = $1,000 OD. Combined economic profit = $1,200 E. None of the above.

Answer 1

Profit is shaded in blue

Draw two marginal revenue curves as downward sloping lines with twice steep as demand and same intercept

In market 1 MR = MC gives a quantity of 2 units and a price of $250

In market 2 MR = MC gives a quantity of 3 units and a price of $500

Profit = (P - AC)*Q

Profit in market 1 = 50*2 = $100

Profit in market 2 = 300*3 = $900

Total profit = $1000

Select C

Market 1 Market 2 $350 $900 $800 $300 $700 $250 MC $600 $200 $500 $150 $400 $300 $100 MC $200 $100 MR MR $0 0 1 2 3 4 9 10 11 12 13 0 1 2 3 7 8 9 10 5 6 7 8 Q (Market 1) 4 5 6 Q (Market 2)