A monopolistic firm operates in two separate markets. No trade is poss

A monopolistic firm operates in two separate markets. No trade is possible between market A and market B. The firm has calculated the demand functions for each market as follows:

Market A p = 15 – Q; Market B p = 11 – Q

The company estimates its total cost function to be TC = 4Q. Calculate:
a. quantity, total revenue and profit when the company maximizes its profit and charges the same price in both markets
b. quantity, total revenue and profit when the company charges different prices in each market and maximizes its total profit

ANSWER

If revenue and cost schedules are calculated:
a. Q = 9; p = 8.5; TR = 76.5; TC = 36; profit = 40.5
b. Market A:
Q = 5 to 6; p = 9 to 10; TR = 50 to 54; TC = 20 to 24; profit = 30
Market B:
Q = 3 to 4; p = 7 to 8; TR = 24 to 28; TC = 12 to 16; profit = 12
Combined profit = 42

If equations are used:
a. Q = 9; p = 8.5; TR = 76.5; TC = 36; profit = 40.5
b. Market A:
Q = 5.5; p = 9.5; TR = 52.25; TC = 22; profit = 30.25
Market B:
Q = 3.5; p = 7.5; TR = 26.25; TC = 14; profit = 12.25
Combined profit = 42.5