A firm sells some output in a perfectly competitive market, where the price is 60 per unit, and some on a market in which it has a monopoly, with a demand function , where is output in the monopoly market. Its total cost function is , where is output in the competitive market. What is the profit maximizing output in the two markets, and price in the monopoly market?
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A firm sells some output in a perfectly competitive market, where the price is 60 per unit, and some on a market in which it has a monopoly, with a demand function p₂ = 100 - q₂, where q₂ is output in the monopoly market. Its total cost function is C = (q₁ + q₂)², where q₁ is output in the competitive market. What is the profit maximizing output in the two markets, and price in the monopoly market? (A) q₁ = 10, q₂ = 20; p₂ = 80 (B) q₁ = 15, q₂ = 20; p₂ = 60 (C) q₁ = 10, q₂ = 25; p₂ = 70 (D) None of the above
Also written as: A firm sells some output in a perfectly competitive market, where the price is 60 per unit, and some on a market in which it has a monopoly, with a demand function p_2 = 100 - q_2, where q_2 is output in the monopoly market. Its total cost function is C = (q_1 + q_2)^2, where q_1 is output in the competitive market. What is the profit maximizing output in the two markets, and price in the monopoly market?
Monopoly and price discrimination has come up 128 times in 7 exams since 2004.
This question is on Multi-plant and multi-product monopoly, part of Monopoly and price discrimination in Microeconomics.
How a monopolist allocates output across plants, markets or products.
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Question from the JNU SIS 2018 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.