Consider a monopoly firm that produces diamonds. This firm sells in two distinct markets, one is completely sealed off from the other. The inverse demand curve for the firm's product in the first market (market 1) is p₁ = 160.5q₁. The inverse demand curve in the second market (market 2) is P2 = 26-0.592. The firm's cost function is C(Q) = 100, where is the firm's entire output (destined for either market: Q = 91 +92). The firm's objective is to maximize profits. The government imposes a unit tax t = 1 on the quantity sold in each market and the firm can charge different uniform prices in different markets. What uniform prices should the firm charge in each market to maximize profit? a. Charge price 13.5 in market 1 and 18.5 in market 2 b. Charge price 18.5 in market 1 and 13.5 in market 2 C. Charge price 16.5 in market 1 and 12.5 in market 2 d. Charge price 12.5 in market 1 and 16.5 in market 2

Consider a monopoly firm that produces diamonds. This firm sells in two distinct markets, one is completely sealed off from the other. The inverse demand curve for the firm's product in the first market (market 1) is p₁ = 160.5q₁. The inverse demand curve in the second market (market 2) is P2 = 26-0.592. The firm's cost function is C(Q) = 100, where is the firm's entire output (destined for either market: Q = 91 +92). The firm's objective is to maximize profits. The government imposes a unit tax t = 1 on the quantity sold in each market and the firm can charge different uniform prices in different markets. What uniform prices should the firm charge in each market to maximize profit? a. Charge price 13.5 in market 1 and 18.5 in market 2 b. Charge price 18.5 in market 1 and 13.5 in market 2 C. Charge price 16.5 in market 1 and 12.5 in market 2 d. Charge price 12.5 in market 1 and 16.5 in market 2

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.9P

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